Consumers Choosing Payday Loans over Credit Cards
Here’s a bizarre twist. Consumers are turning to payday loans more and more as opposed to using credit cards. The recession coupled along with credit card companies tightening of credit and increasing interest rates and fees have driven many to seek ulterior means of finance.
If you are not familiar with payday loans, they are basically money borrowed against an individual’s next paycheck. Typically people will use them when they find themselves in a tight spot financially.
The payday loan industry as a whole has taken a considerable amount of heat over the years because of the high fees that they charge.
Apparently that hasn’t stopped people from using them though, including middle-class families who would traditionally rely on credit cards to get them through tough times.
Typically a fee on a payday loan will be $15 per $100 borrowed. That’s an immediate 15% right off the top. Quite a haircut isn’t it?
To make matters worse, studies have shown that the majority of payday loan customers turn right around and use them again and again.
I haven’t seen any facts or figures on this but I’ll bet pawnshops are doing incredibly well right now too.
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