Are Payday Loans a Good or Bad Thing for Society?

Payday Loans a Good or Bad ThingWith the economic problems that have been faced by America, where wages are not increasing with the cost of living, and where more people are losing their jobs, more men and women are turning to Payday loan companies.

Anyone who has ever experienced a financial drought has considered the prospect of getting a short term loan and even a payday loan.  Most of the time, people are not able to judge whether a payday loan is beneficial or harmful for them.  The truth is the pros and cons of these type of loans depend on the financial condition of the individual taking it.

Payday loans do not require you to have a perfect credit, which is perhaps the biggest reason behind people’s attraction to them.  A good steady job for the last six months and you are okay for the loans.  Payday loans also do not require any security, which makes them even more popular among people in dire need.  Instead of collateral, the loans are adjusted to the amount of what your check would be.  The big advantage of payday loans are that anyone who is in a desperate situation can get out of it with the help of a payday loan.  It can be a very good option when emergency arises according to people who have used their services.

However, a payday loan comes with its share of demerits as well.  The very first thing that immediately strikes out, as the disadvantage of a payday loan is the high interest rate.  Paying back more than half the amount you borrowed is definitely going to hurt your finances.  If the loan is not cleared on time, it could seriously ruin your credit and could result in getting further in debt.  Extensions are available but with each extension, the interest keeps getting bigger and bigger.

In the U.S, the UK, and many other nations,  there have been many incidents where people have gone into debt with payday loans. Unfortunately there have been reports where people have borrowed a few hundred dollars just because it was easy to get the loan so they continued to borrow until it got out of control. Some media reports have shown families losing their homes because of the high interest rates and their failure to keep on top of payments.  There have also been reports of people taking their own lives as they could no longer handle the stress.

The situation of Payday loan companies has even been discussed in the UK Houses of Parliament where MPs have said more needs to be done to make it harder for people to get a loan.  They have said they want to make sure that people can afford to pay back the loan and would like to see interest rates reduced so people are not paying back half of what they have borrowed on top of the original amount.

Payday loans are available all over the world and in some countries they are much easier to access then others. Some say a Payday loan is a good idea with the banks refusing to lend to people with a less than perfect credit rating; others say they just encourage people to get into further into debt.

So is payday loan a good or bad idea?