Posts Tagged ‘direct lender’


How Important Is Payday Lending To Local Communities

Posted by Emily

More and more families and shared households are facing a common challenge on a wider scale.  The challenge is the shortage of funds. The economy’s current state as well as the surge of job losses in this nation has left many families turning to new alternatives that would have never been previously considered.  We hear many testimonies and have been called “life savers”  in many cases during hard times. One customer reported that she was able to use a payday loan to avoid the high Non-Sufficient Funds (NSF) charged by the banks.  The average bank fee for (NSF) $35 per charge, compared to the finance fees charged by most payday lending companies which start at around $15-$20 and up. Many have depleted savings, and borrow money from friends and family to get by during critical times.  Many have taken on jobs that pay far less than what  the household was accustomed to bringing in.  While the unemployment rate is steady and job creation and development has been slow, many have begun to entertain the thought of obtaining short term loans.  This is where the Payday Loan industry fits into the picture.

Who are some of the consumers of payday loans? Having to borrow money is obviously not something most families like to report.  However, according to the Survey of Consumer Finance Data (SCF) the average consumer of a payday loan is approximately aged 36-39, is Caucasian, and has some college education, but  no degree.  Another %19 of borrowers taking out payday loans do have a college degree.  Industry figures as well as the SCF’s data show that the mean income for families who took out a cash advance payday loans was in the range but not much over $32,000, whereas the households bringing an income closer to $80,000 and above were less likely to take out a payday loan.  The Federation of International Civil Servants Association reports that their payday loan borrowers have an average household income of  more than $40,000.   Another report stated that the average family income for families taking out payday loans ranged between $25,000 to $49,000.

Much can be said from this data. Not only does it thwart the previous information stating that payday loans were only utilized by low income households, but it shows the frequent use of these loans by families with both low income and middle class incomes. It also clearly addresses the necessity of having access to this type of service for both income levels.

We may be able to help you during your cash shortage. Apply here

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Payday Lenders vs. Banks: Alternative and Traditional Loans Rivalry

Posted by Sara M. Varese

Traditional Banks Offering Alternative Payday Loans

The Consumer Overdraft Protection Fair Practices Act and the Credit Card Accountability, Responsibility and Disclosure Act may have encouraged banks to offer alternative loans, such as payday loans, causing competition among payday loans direct lenders and national banks observes Solomon Finance.

Traditional and untraditional lending

Because these enactments have muffled bank’s major sources of revenue, marked with Bank of America’s recent declaration that the overdraft fee legislation will be put into effect this coming summer, banks are reducing risks and pursuing other sources of income.  These changes include raising interest rates on credit cards, offering less free checking accounts, limiting student loans, requiring more spending to engage in credit card perks and competing against payday lenders by increasingly marketing payday loan type products under different names such as Direct Deposit Advance, branded by Wells Fargo.

As lending options continue to narrow in availability, national banks are not the only institutions competing for payday loan customers: credit unions such as Kinecta Federal Credit Union are also offering these types of services.

Short term cash loans are not the only thing that payday lenders and national banks have in common:  Both have been the largest contributing efforts to challenge federal financial regulations.  However, national banks may have an unfair advantage, argues Steven Schlein, spokesperson for the CFSA, as he mentions that national banks are exempt from state laws limiting interest rates. He adds, “banks caused the financial meltdown, and they’re spending millions and millions to spare themselves from tighter regulation while throwing the consumer lending industry under the bus,” he said. “They’re trying to divert attention to us.”

Although extra attention has been given to payday loan lenders during these financial reforms, it is unlikely that they will be significantly impacted in comparison to 2006, when Congress passed a bill that capped interest rates to 36% for active military members.  An interest rate cap at 36% on small loans ranging from a payday loan amount of $500, on a typical two week pay period term would yield insufficient profits to sustain business operations.

The industry is constantly changing: by subscribing to finance newsletters or reading industry payday loans blogs, one can stay informed and educated about traditional and untraditional lending options.

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