Are Payday Loans Really The Bad Deal The Federal Government Says They Are



Are Payday Loans Really the​ Bad Deal the​ Federal Government Says They Are?
Have you​ heard the​ Federal Trade Commission has issued a​ Consumer Alert with a​ big headline that says,​ Payday Loans = Costly Cash .​
Just as​ there are many ways to​ look at​ the​ situation,​ the​ same is​ true with payday or​ cash advance loans.
In simple terms,​ a​ payday loan is​ advance on​ your next paycheck .​
There are many companies throughout the​ country that offer these very short-term small loans .​
The term,​ or​ length of​ time you​ have to​ pay back the​ money typically runs from 2 to​ 4 weeks .​
The fees or​ costs of​ this short-term loan can be anywhere from 25 to​ 50% .​
And this is​ where the​ FTC comes in​ with their complaint.
The government agency spends a​ lot of​ time acting like they help consumers .​
The government has the​ authority to​ make changes in​ how these loans are offered if​ they were really interested in​ helping or​ protecting consumers .​
Instead however,​ they state that the​ APR or​ annual percentage rate of​ the​ small loans is​ in​ the​ hundreds of​ percent in​ the​ are right,​ but that's not the​ whole story.
Everyone knows that when you​ buy a​ product in​ a​ small package it​ costs more .​
Larger or​ bulk packaging usually costs less .​
Now consider how this fact as​ it​ relates to​ the​ payday loans.
Consider these facts:
1 .​
a​ payday loan usually is​ anywhere from $200-$500 dollars .​
In the​ lending business,​ this is​ a​ very small loan amount .​
It's reasonable then,​ that the​ cost of​ this service would be more expensive than a​ larger loan.
2 .​
a​ payday loan is​ as​ much a​ service as​ it​ is​ a​ loan .​
Although a​ bank or​ credit union may offer a​ lower interest-rate,​ how many of​ them would be willing or​ able to​ front you​ a​ couple hundred bucks to​ tell your next paycheck?
There's also no way a​ bank or​ credit union would be able to​ process your loan in​ just a​ couple of​ hours like a​ payday loan service does every day.
3 .​
Consider payday loans in​ their costs against other purchases.
When you​ buy something at​ the​ store,​ the​ price charged can be broken out into two parts .​
The first part is​ the​ actual cost of​ the​ product .​
The second part is​ called a​ markup .​
a​ markup is​ simply the​ difference between the​ actual cost of​ the​ product and what you​ are charged as​ a​ customer .​
The markup covers the​ building,​ employees,​ and other costs of​ running the​ business including profit.
When going out to​ dinner with food cost is​ a​ very small part of​ the​ overall total you're charged .​
Furniture,​ jewelry stores and many other retail shops have markups that are much larger than a​ typical payday loan that's payback on​ time.
Jewelry stores and many other retail shops have markups,​ which is​ the​ amount of​ money over the​ cost of​ the​ product,​ that are much higher than in​ on-time payday loan.
So when you​ look at​ a​ payday loan as​ a​ service,​ and the​ fact that when the​ loan is​ paid back on​ time,​ the​ actual interest and fees are really quite reasonable .​
I​ would not disagree with the​ FTC that keeping a​ short-term payday advance loan active and continue to​ roll it​ over can be very expensive.
The use of​ a​ payday advance loan in​ an​ emergency situation and for a​ short period of​ time can really be a​ lifesaver.





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