Los Angeles, CA (Vocus) July 24, 2010
According to a research done by Solomon Internet Funding, a payday loan lender, even before the state of our current economic crisis, stimulus packages and financial overhaul bills it was difficult for the average American to walk into their bank and receive a small payday loan until payday if ever they found themselves a little short on cash until their next paycheck. In fact, even with good credit there have not traditionally been many options to obtain a small short-term cash loan in our country, although there has always proven to be a demand for this type of credit. Perhaps it was out of this growing demand for short-term credit options, or due to the fact that no one else was willing to lend to these millions of hard-working Americans with less than perfect credit, of which the “payday loan” was born.
Payday Loans (also commonly referred to as cash advance loans) are generally a small loan between the ranges of $100-$1,500 of which the customer pays back usually on their next paycheck date. The average payday loan is only $300, and most customers are tightly budgeted and would rather pay $15 per $100 for a one-time loan, as opposed to bouncing checks or paying multiple overdraft fees.
Typically payday lending is regulated by State laws, of which currently 37 States still allow payday lending. Some states have banned payday loans or have capped APR%’s at a mere 36%, which only allows the payday loan lenders to charge $1.38 per $100 on these loans, meaning that they are literally not allowed to charge enough to stay in business and cover operating costs. And unfortunately for the American people, states that have banned payday lending do not address the demand for credit options nor do they offer any low cost alternatives for working families with bad credit. Many times (such as Ohio) big banks will offer payday loans under a different name once payday lending is banned in their State.
Traditionally payday lenders have been very resourceful at keeping their business alive in the face of legislative changes. Within the limits of the law, many times lenders will find another way to offer credit to their customers such as title loans, installment loans or even the credit service organization model (or CSO business model, which is popular in Texas).
Some wrongly criticize our industry for fighting to survive and offer loans to our customers. The simple truth is that we in the payday lending industry offer a much needed service at a very affordable rate. Our customers are happy with our loans, and we fully disclose every single detail of the loan. We don’t “target” customers. We simply place our locations close to our customers just as any other business would. Studies have shown that households in States that have banned payday loans have suffered more without payday loans, and pay more overdraft fees and turn to un-regulated on-line lenders instead! Although the future of payday lending is uncertain, we offer a needed product with a real demand, and therefore will continue to grow and serve our customers responsibly and within the limits our or State or Federal laws.
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