Why Do So Many People Rely on Payday Loans

For many people, it feels like the recession is still in full swing. Gas prices remain as high as ever, utility bills aren’t much below record levels and luxuries are rarely permissible on an average monthly budget.

Sometimes even a single meal out can seem like a rare treat.

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As such, it’s of little surprise that most Americans can barely get through the standard expenses of any given month let alone make savings for the future.

A lack of savings can breed insecurity, both financially and emotionally. When you’re living on the breadline – as so many people in the country are – even a small unexpected expense or one-off bill can send you spiraling into a financial black hole.

A Financial Product Fit for Purpose

There is a wealth of financial products out there for just about every need, but very few (if any) cater towards those in need of quick cash to get them through a tough couple of weeks. Without access to short-term lending, the remaining options aren’t particularly appealing – asking loved ones for cash can cause a certain degree of embarrassment, and advertizing financial shortcomings in the workplace by asking employers for an advance isn’t much better. The other options are even less unpalatable; banks ill-equipped to provide reasonable loans for the short term, and that pretty much leaves illegal lending as the only other (terrifying) alternative.

This is the primary reason why payday loans have become popular in recent years; simply put, they’re a necessary lifeline for many people where long-term credit just isn’t a viable option.

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Who Relies on Payday Loans?

In short, a large percentage of people.

Last year $30.1 billion payday loans were lent out throughout the course of 2012. Since supply fuels demand, this says less about the payday loan industry than it does about the state of the economy and the needs of people struggling to get by every month. Indeed, the increase in demand for short-term credit has correlated almost exactly with the sudden rise in the US poverty rate which began five years ago.

This, of course, all coincides with the start of the global economic collapse. Caused by reckless and irresponsible lending by the major financial institutions, there are very few people that haven’t been affected negatively by the fallout, except arguably the very institutions which caused it in the first place. As a result, it’s somewhat ironic that banks have made it harder than ever to now access credit, turning down applications from anyone with less than an exemplary credit score.

As mentioned, however, the practices of traditional lenders are immaterial; long-term loans are not suitable for short-term financial hardship (a fact that also nullifies the criticism over payday loans having a high APR which we discussed in an earlier post.) People who need $500 to service their car to keep them commuting for the rest of the month realize that taking out a $7k loan paid back over multiple years is like cracking a walnut with a sledgehammer. Until corporate banks are able and willing to help out the Everyday Joe, we’ll be around to offer a service to suit this need.

Addressing Misconceptions Head-On

While it’s true that some of the people who rely on payday loans use the credit offered irresponsibly and without forward planning, this is a stereotype of the industry and such applicants are few and far between. For the most part, people applying for a payday loan are honest, hardworking folk who use short-term credit for the purposes it’s intended for: getting to that next paycheck and back to a smoother cashflow.

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Similarly, we’re proud to be among the few lenders who are committed to educating consumers about the industry – both the good and bad – in order to help people make an informed decision about their borrowing options.In addition to being on hand to answer questions 24/7, we work hand in hand with our customers in order to dispel the common criticisms of payday loans and provide a valued financial service to those in need.

Get in Touch

If you have any queries about what we’re able to offer or would like to discuss your credit needs, don’t hesitate to get in touch with one of our customer service representatives today.

We’ll get you back on track in no time.