Leading loan experts have requested borrowers to practice caution while opting for payday loans to fill the small financial gaps in between their consecutive pay checks. According to them storefront lenders are trapping the borrowers who often find no other easy solution to their immediate financial crunch. But the authorities have also said that ‘they strongly believe that all the payday loans are not irresponsible in their treatment towards borrowers and some are good enough to give ethical financial advice as well as comfort to the worried borrowers.
They further added “that taking a loan from an unethical payday lenders might result in failure to repay back on time because of the unrealistic interest rates which keep on adding to the borrowed principal after every passing month.”
‘Borrowing loan from the payday lenders is a convenient choice for many needy borrowers’, says Ken Clayton, president of the New Mexico Bankers Association. He also adds that these lenders have a strong place for them in the financial lending marketplace. According to him, ‘the key to remain confident while borrowing payday loans is to pay back the loan amount strictly on time.’
as failure in doing so becomes the reason for all the problems that come with loan renewal and increasing interest amount. He has urged borrowers not to practice loan renewals often as these might be a little more overwhelming for their financial health.
As per a research report revealed by the Pew Charitable Trust, around 12 million Americans opt for these payday loans every year, however, they further spend about $7.4 billion on these loans at 20,000 payday lender stores. The annual usage figure for payday loans is 5.5 percent. However these rates fluctuate in between 1 percent to 13 percent, quotes Pew Charitable Trust. The research done by Pew later on found that an average American borrower takes about eight loans of $375 on annual basis and spends $520 on paying back the interest excluding the original principal.
Borrowers most commonly take payday loans to cover their day to day expenses like pending cooking gas and electricity bills, credit card payments, home rent, car title loans and tuition fee for college etc. An average borrower remains in debt for around five months for taking a payday loan in one month of the financial year. This very appropriately describes the plight of the payday loan industry. When several storefront lenders were called for their take on this story, no one ever returned a response.