Monday, January 24, 2011

I need a loan.  Where can someone get a loan.  Banks are not lending.  Most people have credit problems.  The so called middle class is really the poor with a job that leaves no extra money to spend on pay day because everything is budgeted on a loan from gifts to schooling.  Most people can not get a loan at the bank where they keep their debit or checking account.  Now the only place for a quick loan is at payday lenders.  You know, the unusual e-mails that pop up on your computer offering you $500-$1,000 in a day with some information on a brief application.

These lenders hardly reject any applicant because despite your credit worthiness good or bad will charge you an annual interest rate of 300%; but you will get that loan and you will promise to repay that loan within two weeks. (Traditional banks have a interest limit of about 39% on loans.) Some loans are processed within a half hour.  Payday lenders are pushing hard to lure away customers from traditional banks.  The effort is getting a boost from the industry’s loan crunch, especially for borrowers with blemished credit, and toughened regulation of fees and interest rates charged by the nation’s 7,700 banks and savings institutions.

Payday lenders  are aggressively pitching debit cards and online bill payment.  Some companies are opening payday-loan branches near banks, designing them to look like them, even hiring former bank-branch managers.  Most pay-day loans require a borrower to write a check dated two weeks from the date of the loan.  When the loan is due, the lender cashes the check, which includes the full loan amount plus interest.  So, you pay $55 to get a $500 loan. 

These loan sharks are successful because times are so bad for so many people.  Because of the sluggish economy, bank failures, and tighter credit at many banks, the amount of available credit for auto loans, credit cards, consumer finance loans, student  loans and other types of consumer credit declined to $400 billion this year according to the credit God Equifax Inc.  All of the regulations given out by the financial crisis is pushing some customers out of  traditional banks. 

Payday lenders say their interest rates are justified because the loans they make are unsecured and have high default rates.  A spokesperson for Cash America International Inc., the nation’s largest publicly traded lender by revenue, says their company “has always been in the business of meeting the needs of consumers who have nowhere else to turn.’’  The consumers are desperate and cannot get a loan from a bank.  The consumer is drowning in debt and they don’t care anymore about their impossible credit problems.  Give me the money and charge me whatever you want, I owe everyone anyway.  Americans are drowning in debt and they’ve given up caring.  Lets live day to day.  How sad.

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