Thursday, 10 Mar 2011

Pros and Cons: When a Payday Loan is Your Best Choice

There is a lot of discussion these days, both among elected officials and at the typical office water cooler, about financing through a payday loan. Certainly it has garnered high profile media attention from time to time. But the true facts of what comes with an easy cash advance often miss attention of the pols and pundits alike. Here are some points to consider:

• 100 million payday loan transactions last year

• 241 percent growth in payday loan borrowing (UK) from 2006 to 2010.

• Typical percent paid on a loan is 20 percent (when there are no rollovers, which are available but which add to the cost)

• Average borrower uses payday easy cash advance loans 3.5 times per year

The growth rate is an indication of several factors, of course. First, that economic conditions have placed millions of households in a position of depending on a single paycheque instead of two (if not without any paycheque whatsoever). Second, these same conditions have pushed many if not a majority of those households into bad credit status. This means that it is increasingly difficult for them to get loans and lines of credit, and when they do, it is more expensive to borrow money than it is for people with good credit.

Part of the growth in payday loan borrowing is also driven by the ease with which it can be done. Pre-Internet, that was done by going to a storefront location, a time-consuming process that involved standing in line, speaking with a clerk (often through bullet-proof windows), and walking away into the unfamiliar neighbourhood with a pocketful of quid.

But the modern, efficient and by far most popular method now is through an online easy cash advance. The application is done entirely from a personal computer. The time required to do it is about 15 minutes, often less. And as a service that is both convenient and safe, the money is sent electronically into the borrower’s bank account within one hour.

Today’s post is a guest post and doesn’t necessarily reflect the views of Ms. Money Savvy.

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