Payday loans are hardly likely to simplify the life of a modern individual. Gaining money whenever it is needed is a benefit that comes with a price. And that is exactly why there is so much discussion about how reasonable this industry is.
It is evident that credit length determines interest rates in the form of inverse relationship. Thus, the main attraction of payday loans, namely, short term loans, creates the greatest trap for borrowers. According to the Consumer Financial Protection Bureau (CFPB), the majority of those who use the given service show disputable paying capacity. That predictably results in non-humanistic behavior of lenders, which mostly concerns not only CFPB, but a variety of authoritative organizations. Generally, the experts never stop speculating on whether the payday loan industry has a right to exist.
They Say No
Turning to those who prefer disabling the service, the most influential one is the Center for Reasonable Lending, abbreviated CRL. As obvious from its self-explanatory title, that organization votes for implementing the tough regulations in the industry offered by the CFPB. The key option they postulate is that local payday lenders take advantage of minorities. The CRL representatives insist on legal limitation of the interest rate within 36 per cent.
Actually, the least debatable way to security in lending is cooperation with banks. But enhancing their rights in short-term loans would inevitably attract additional borrowers to debt traps. Taking that into account, there are more quesitons than answers when payday loans are comcerned.
They Say Yes
Alternatively, popularity of a product or service most clearly reflects demand for it. Payday loans are not an exception, and that is the key argument of those who support the industry. Unlike opposers, defenders are individuals rather than organizations. Actually, that is quite typical providing that the official media present a single viewpoint.
A range of economists and financial analysts derive the spread of payday loans from unsufficient access to traditional credits. The latter majorly require good credit history and a stable income, often financially helpful relatives as well. A person who lacks any of those may face a considerable challenge, more so, on the occasion of financial crisis. Moreover, certain experts claim that the amount of interest such borrowers need to pay back to a local lender sometimes appears tilerable ( if handled well).
Generally, the economy resembles an ecosystem: anything present in it appears relevant, since it performs certain functions. Those may be not really evident at first sight, but that does not determine the ability for eliminating the given integral. Therefore, the experts are highly doubtful about putting an end to the payday loan industry.