What’s going on with the payday loans industry? There are 12 million adults in the United States alone each year who are taking out at least one payday loan. This fact says a whole lot since the average user will take out at least eight loans throughout the course of a year. These loan amounts are calculated to be around $375 on average which would mean $520 would be paid on interest, if paid on time. Many borrowers end up keeping loans out for more than just a few weeks, in fact the average time a loan is out is for five months. This drives the interest amount even higher.
What are people using these short-term loans for? It seems that the average user is using payday loans to keep up with ordinary living expenses. Unexpected emergencies are not used as often, but then again, emergencies do not happen everyday. Living beyond one’s means continues to keep people in debt. Cutting back on expenses is not the priority of many users unless direct payday loans lenders become unavailable. getting help from friends or family, put off paying bills or even sell possessions still seem like a better solution to many than cutting back on monthly expenses. The states which have strong regulations do not see their residents reaching out to other sources as much and the lenders have seen sharp declines in loans for people living in those states.
There is something positive to be said about state payday loans regulations. The goals of the government was to protect their residents from becoming trapped into a debt cycle. The debt will just be from something else. People struggle with finances in all states. maybe in these strict payday lending states there is a rise in credit card debt or use of car title loans or pawn shops. Since there are some banks and credit unions who now do their version of payday loans which do not follow the regulations, those may be sources which technically fall into another category. High priced short term loans are still the There are no states boasting improved credit scores caused from the strict payday loan regulations, the residents must be finding some avenue for financial help.
The simplicity of cutting back and restricting personal spending seems so out of date when keeping up with the Joneses is a lifestyle too many are unwilling to break free from. Advertising is cunning and we find ourselves needing items which are only wants. Latest versions of electronics, car upgrades, cell phones and travels are more than double dippers into bank accounts.
Is it payday loans which have become a way of life by signing on for one then falling into a trapped cycle? Or is it one avenue gone wrong for so many trying to keep up a lifestyle beyond their means? Cash advance loans are not geared to live on, but to be used to get out of an immediate financial crisis. The high risk loans are not affordable when the loan is a larger portion of next week’s paycheck. Whether the short-term loan is coming from a payday lender or your local bank, the high interest will still cause trouble for your finances if you do not pay it off at the end of the term.