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Payday loans are a billion dollar industry today. The number of payday loan providers is on a steady rise and so is the number of borrowers. This points to the dependence among people with these loans to tide over their cash emergencies. These easy and fast loans offer great relief to many who find themselves facing a cash crunch and their pay day still far away. However, these loans should be taken out only during cash emergency and paid back within the next month. These should not be looked upon as a long term loans as they are not. They carry very heavy interest and that can only get bigger if not paid in time.
Surprisingly, some banks too, have started showing interest in offering payday loans. Earlier, these financial institutions showed little interest in this industry. And some of these trusted institutions are certainly not the biggest loan sharks in town. Generally speaking, people taking payday loans from banks remain in debt for an average 175 days a year. The regular bank payday loan with a yearly 365% interest rate is certainly less than what other payday loan providers are charging.
The advance loans from banks, just like payday loans are usually made for two weeks or a month. But here, the banks do not accessing the borrower’s bank account information or use post-dated check. It makes use of customer's checking account to pay back itself. Many customers are not able to pay back the loan and fees, thus forcing them to extend the cycle of debt and forcing them to take out another loan to break free of the earlier debt.
However, a recent research shows a cycle of higher debt with bank payday loans. The borrowers pay more overdraft fees than non-borrowers. This is a clear sign that some of these banks are targeting vulnerable borrowers and have already been warned to stop predatory bank payday lending. Already investigations are on to curb this practice and the regularity bodies are spreading more awareness among customers on these issues. For example, in US, Payday lending has been declared illegal in North Carolina. But still, there are many banks in Alabama who are still marketing their payday loans to their customers.
According to some banks, their loans differ from those offered by payday lenders. The advantage here is that as the borrowers are already their checking account customers, they can be sure if the customer will be able to repay the loan and has the fund. Moreover, the banks account the repayment history of their customers to credit bureaus unlike payday lenders. Moreover, banks normally won't give out new loans unless and until the earlier loan is paid off, unlike the payday loan lenders.
If your bank is payday lender, you should try to get complete information about these loans. Talk about the terms and conditions, the interest rates charged, the payback time etc. Don’t be afraid to join the call for regulators to prevent some banks to keep away from payday loans.
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They "cycle of debt" is a longstanding myth perpetuated by payday loan opponents and stoked by the media. A reading of any SEC filing by the public payday loan companies will reveal that 94% of all loans are paid back on time.
ReplyDeleteA 36% APR rate cap puts payday lenders out of business. It's been said over and over again, yet nobody seems to want to listen. And if you doubt that, just read the quarterly or annual reports of any public payday loans no credit check company.
Once payday lenders are gone, demand for short term credit remains. You then force people to more expensive forms of credit, such as bank overdraft fees, or send them to more expensive offshore internet lenders.
Payday loans are easily approved, thus a lot people resort to this type of loan for fast cash or emergency situations.
ReplyDeletePayday loan borrowers should not hesitate to ask the bank or any payday lenders regarding interest rates, terms and conditions and other things that are not clear. It's also necessary that borrowers are aware of the Fair Debt Collection Practices Act to keep you protected.
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