Cash Advance Loans Are More Beneficial Than Once Believed
Anyone who has followed the news knows that the most well loved forms of cash advance lending are the payday loans. The purpose of a payday loan is to provide a small term solution to avoid long term complications and potentially life crippling problems. These may be as simple as buying enough gas to make it till the next payday, to as extreme as being the only method to make rent for the month. Cash advance loan simply allow a family or individual who is unable to make ends meet, find the helping hand they need to survive until their next paycheck.
Unfortunately, the cash advance loan industry has received terrible press due to a perceived notion that a payday loan has the equivalent of a 400% APR and therefore, any company in the industry is small more than a legal loan shark. This perception couldn’t be further from the truth as a direct comparison between the loaned amount and the total paid to the lender between cash advance and traditional loans shows that payday loans only cost borrows 15-30%, while traditional loans range from 40-200% of the original loan.
In fact, because of the way interest works, traditional banks make more money per transaction than any cash advance loan company, but they receive their payment over the course of months or years rather than as an upfront cost. In this method, nearly any comparison between Cash Advance Loans and traditional loans becomes obsolete, and a question is formed regarding the real reason for the attacks on the small term loan industry.
One might argue that providing payday loans enables people to be frivolous with their money, and does not teach them the proper methods for managing their budget. But, this argument is in stark contrast to the numerous studies that have shown that the majority of individuals who take cash advance loans belong to the middle class, and have studied their options prior to taking the small term loan, and were satisfied enough to take another loan if the need ever rose.
Additionally, many of the huge name banks who have been fighting against the payday loan industry are inventing their own form of small term loans, comparable in price to a cash advance loan, and labeled as something different to avoid being considered under the same laws and regulations as the cash advance industry. Ultimately, the argument becomes more about traditional banks losing money than payday loans being terrible for society, and self interest like that tends to always be terrible for society.
Paul Smith has worked closely with numerous families who have been in financial distress and did not have the credit history necessary to receive a line of credit to help them. After working with them on reducing their monthly bills, when the situation was appropriate, Mr. Smith would recommend using Payday Loans to avoid late fees and collections. Even though a Cash Advance Loan is only a small term solution, Mr. Smith firmly believes that when used properly, it can be of fantastic benefit.
