Payday loans are very notorious especially to consumer groups. Payday loans are not allowed in many states because the state legislatures do not allow lending money at high interest rates.
When applying for payday loans, a personal check payable to the borrower plus additional charges. The check is held on to until a due date. The loan may be extended, renewed or rolled over when the expiration of the loan comes. These options have corresponding charges.
Because no credit check is done, certain information such as checking account proof, employment certification, bank statements, SS numbers and driver’s license number should be provided when filing for a payday loan.
Payday Loans: The Good, the Bad and the Ugly
Good. Despite their excessive interest rates, payday loans really provide quick loans for employed people but for whatever reason don’t have available cash.
Bad. The disadvantage of payday loans is the high interest rates and fees to acquire these quick loans. An argument is that the working poor is being taken advantaged of and is a violation of usury laws of the state. By merely contributing to campaign funds of state representatives, payday borrowers can bypass usury laws.
Ugly. The ugly thing about payday loans is that many borrowers find themselves falling into a bind which they cannot get away from.
Your Neighborhood Bank Gets In On the Action
Despite all of the negative publicity about payday loans, the industry is growing more popular as ever. Businessmen countrywide are setting up payday loan shops in every state and even in the Internet. They will remain for as long as consumers seem to want them whether consumer groups like it or not.
As a matter of fact, some neighborhood banks offer what is called “overdraft privilege.” This is a privilege granted to the customers to overdraw their checking accounts on purpose rather than returning a check due to insufficiency of funds.
In exchange for the holder of the account consenting to pay the insufficient charge fee or some set amount, the bank will not return the check marked insufficient funds. Although bankers will never confess it, they are offering their account holders a short-term, immediate payday loan at a high interest rate that is just as bad as the payday loans granted by private financing companies.
Living within one’s means is still the best option so as not to fall into the trap of getting payday loans. Learn to prioritize your expenses.