Out of Control Policy Blog

The Lowdown on Payday Loans

The idea of seriously limiting payday loans seems to be gaining momentum. Katherine Mangu-Ward takes an in-depth look at the ramifications of such a move here.

Why do people here and elsewhere seek short-term, high-interest loans, using a chunk of their next paycheck as collateral? Well, what would you do if you needed $200 RIGHT NOW?

You could put it on your credit card. It's the American way! Unless, like so many Americans, you've already maxed out your cards. The average U.S. consumer carries $6,226 in plastic debt, according to the credit reporting agency TransUnion. With a potentially long financial market contraction ahead, card companies have been aggressively reducing limits and discontinuing new offers. Although the Credit Card Act of 2009 makes it harder for companies to change their terms after the fact, the availability of credit is likely to shrink further. Maybe you need that $200 to make the minimum payments on those maxed-out cards.

You could write a personal check and hope to scrounge some money for your bank account in time to cover the transaction. Such faith has a low rate of return, and dashed hopes can be awfully expensive. A bounced check from a basic Bank of America checking account, for example, costs $35, plus any fees the stiffed merchant tacks on. Many banks offer overdraft protection-they'll extract the money from you later-but charge between $10 and $35 for the favor. Repeated bounces and overdrafts have more serious consequences. American banks unilaterally closed 6.4 million checking accounts in the pre-recession year of 2005 alone.

You could borrow money from friends or relatives. Obtaining cash from intimates may get you the best interest rate on the market, but costs are extracted through other means. Family reunions can easily become awkward investors' meetings, and as fans of Judge Judy can tell you, even a small loan can be a remarkably efficient way to destroy a friendship.

You could pay a bill late. A high-risk strategy. Utility and phone providers can be quick to cut off service and charge a disconnect and/or reconnect fee. You could be looking at an extra $40 to $70 penalty every time, not to mention costs incurred in lost productivity.

Or you could get a payday loan. Like I did.

Adrian Moore is Vice President, Policy


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Comments to "The Lowdown on Payday Loans":

Paul | October 5, 2009, 5:59pm | #

The high APR's for pay day loans are irrelevant when they are used as intended. The fees charged by major banks can add up just as quickly as those in the cash advance industry but don't seem to get as much scrutiny. Must be better lobbyists.

One Hour Cash Advance Loans | October 21, 2009, 8:46am | #

Anything can happen at any point in our life. Life is full of uncertainties. An emergency in middle of month can leave you stressed. During such situation One Hour Cash Advance Loans can be of great help. These loans are taken before salary day comes so that the borrower can meet short-term requirement for cash.

No Faxing Pay Day Loan | October 21, 2009, 9:36am | #

No Faxing Payday Loan is becoming very popular because they are simple and quick. If you are in need of immediate cash then going for such loans is the best choice.

Quick Pay Day Loans | October 22, 2009, 6:21am | #

There are a number of options for getting quick cash whenever you are in a hurry. Quick payday loans are one of the fastest solutions that take care of your financial troubles. You can get the cash the very next day.

Personalloans | October 22, 2009, 6:49am | #

Are you in the middle of a financial emergency? Are you looking to get a loan fast? Then you need Fast Cash Personal Loans. There are many financial institutions that provide personal loans. There are many websites that give personal loans online.

Cash Advance Quick | October 22, 2009, 7:17am | #

Cash advances, popularly known as payday loans, are an ideal way to deal with short-term financial problems. You can insure a good amount from $100 to $1500. This amount is electronically deposited into your bank account in the current period of 24 hours of requesting the loan in cash. Even if you feel it is inappropriate to run your application, you may send a request to your creditor.

Paycheck Advance Loans | October 22, 2009, 7:52am | #

A paycheck loan is a short term loan that a borrower can take to cover expenses till the next payday. It is also called as paycheck advance and payday advance. These Paycheck Loans don’t require faxing of any documents or credit checks. Anyone who’s 18 years or older and has a stable job with an income of at least $1000 per month can apply.

Same Day Cash Advance | October 22, 2009, 8:33am | #

Payday loans help you tide over temporary financial crisis. If you are in dire need of some fast cash, then you can consider the option of taking a payday cash advance. You can apply for the loan online. The lending company take a day’s time to process and approve your loan. Once approved, the amount is transferred directly to your loan account and you are informed accordingly.

Payday Loans With No Faxing | October 22, 2009, 10:32am | #

Payday loan no fax is the most convenient way to raise cash when the need arises. These loans are also known as cash advances or paycheck advances. The basic concept behind payday loans is to meet the economic requirements until the next paycheck.

Pay Cash Advances | October 23, 2009, 2:07am | #

Payday loans are short-term loans that must be repaid by the next payday. Even if you have bad credit and meet the criteria you are still eligible for payments up to $1000. The repayment duration of a payday loan is from two to four weeks. The person has to pay back his entire payday loan including the interest charges before the next payday’s money is deposited into the account.

Cash In 1 Hour | October 23, 2009, 2:52am | #

If you have ever needed cash in one hour, payday loans should be what you should be looking for. All you have to do is log on to the website and fill in the required details. You will need to give your name, address and source of income and bank account number. Once your details have been submitted, they will be verified instantly and you’ll get the money in your account in an hour.

Advance Cash Loan Payday Quick | October 23, 2009, 3:31am | #

Payday loans are a good option if you want to keep some cash on hand until your next payday. At times we find ourselves in a tough situation in the middle of the month because we have an unexpected circumstance, Payday loans are the solution to such problems. These are short duration loans which are given before payday, and therefore come in handy to avert bad situations.

James J. | October 28, 2009, 12:10pm | #

It is therefore important to note that payday loans are best used as a short terms means of easing financial difficulty, and if you require a loan for a period longer than this then a personal or secured loan is likely to be more suitable.
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