Bad Credit Payday Loans: All You Need To Know

01/09/2012 02:26

 Bad credit payday loans or fast payday loans face a lot of criticism every now and then. There is a certain group of people that is constantly using payday  loans. While there is another group, that do not like payday loans at all. Even with so much opposing views about payday loans, they are still very popular. If you need a payday loan, you will find hundreds of lenders out there. For instance, if you are in USA you can visit to get a payday loan within an hour. No one is stopping you from getting a payday loan but..........


But before assuming anything about payday loans or before getting a payday loan, you need to find out why a fairly large number of people or I must say critics oppose payday loans. There is not point in ignoring the views of thousands or millions of people without listening to them.


Let's see what all those critics say about payday loans, and why they are against payday loans.


1- Critics say that payday loan lenders are making poor more poor. This is because payday loans are mainly used by poor people. Those who do not have enough cash. Those who need money. So what happens is those who are already short of cash. Those who do not have any savings use payday loans. And in return, they pay heavy interest to the lenders. Payday loans carry a very high interest rate. Normally, a borrower has to pay $115 to $120 for a payday loan of $100. So it is said that lenders are draining money. They get money from poor and give it to rich. Rich are getting richer and poor are getting poorer.


2- It is also said that payday loans have a very high interest rate which is unfair. Critics are of the view that payday loan lenders charge way too much interest and fee to their clients as compared to their actual cost. The cost incurred by payday loan lenders is very less as compared to what they are earning.

On the other hand, lenders say that the cost associated with payday loans is very high. It is much higher than other types of normal long-term loans.

Critics oppose them and say that the cost for normal loans (home loans, car finance loans etc.) is higher than payday loans. Since for long-term loans, lenders have to conduct a complete credit scoring check of the potential buyer, whereas in case of payday loans, all they have to do is verify borrowers via their employment and bank statement. So this simply means that cost of long-term loans is higher than short-term loans (payday loans), so lenders need to charge less interest to payday loan borrowers.


3- Critics also say that payday loan lenders use normal or routine collection methods while dealing with payday loan borrowers which is absolutely unfair. The collection techniques for a payday loan must be different from a mortgage loan. The actual amount involved varies a lot. In case of payday loans, people do not get more than $2000 in any case. Whereas in case of other loan types, borrowers take millions of dollars in loan. So the collection practices must be different for the two.


This is not all, critics have a very long list with them but these were the most important and most valid points thus far. So next time, when you apply for a payday loan, do consider these views as well. These views can be of great help for you in one way or another. And I hope you will get something good from these views and criticism.