Loan Proposal For Payday Loans

2490 Words Mar 17th, 2016 10 Pages
What if you were down on your luck, and short a couple hundred dollars for an electricity bill, and the power company was threatening to turn off your power and none of your friends or family members could help you out? What if you went to your employer and asked for an advance on your pay, and they denied you? With the looming threat of losing power and the fees laid on top to get reconnected, it may be easy to lose hope. There is, however, an entire financial industry set up to help with such problems. A payday lender is probably nearby that will provide you a small, short term loan to help you get back on your feet. Payday loans come in many forms, but generally speaking, they are small ($375 on average), short term (one to two weeks), high interest (391% API average) loans. Advocates for payday loans argue that the loans are available for people who have emergencies like sudden medical expenses, and are available when alternate sources of money are unavailable, or when the alternatives may be more expensive. Opponents of payday loans point out the fact that a broad majority of payday loans are not used for unexpected expenses, but are rather used for recurring expenses. Opponents also argue that, while the loans are advertised as being short term, in reality, “a significant fraction of customers use payday loans repeatedly,” and get trapped in a cycle of debt that is exploitative. These people argue for state and sometimes federal regulations to curb the exploitative…

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