Loans were taken since the day human beings have learned how to trade. The difference is in the method of borrowing and lending the loan. Earlier the loan was not only given on terms of money but was also given by exchange of goods and services. In this modern world of money loan is giving for various purposes like house loan, car loan and education loan etc. but there is one thing that was not taken in consideration and that is loan for small amount of money. Smaller amount may also be very important for those who are unable to fulfill their small requirements as they do not have enough cash.
Payday advance lenders understood this problem of the public and introduced payday loans. These loans are only given for small amount of money that is up to $1000. Other than the amount the repayment period is very small as well as you need to pay back the amount along with the lending charges within 30 days of time. Since the time these loans were introduced they had to face a lot of controversies and there for till date it has been the most discussed topic in the market.
The lenders charge a very high APR therefore the payday loans have always been a problem creator rather than a problem solver for the employee’s credit union. They have raised their voices against this service of payday loan companies since day one. After a lot of controversies, discussions and justification it is now that the payday loans companies are allowed to operate in some parts of the world whereas it is announced as an illegal business operation in the rest of the cities.
The main objection of the employee’s credit union was that the interest rate charged on the payday advance loan amount was very high and instead of solving financial issues it tends to create one big problem for the low income class people. Not only this but since the payment time period is also very small therefore it becomes almost impossible for those who do not earn much from their jobs to pay back the loan amount along with the charges with one month’s income and if they do so then they are unable to survive through the entire month as they get out of finances due to which they might apply for the loan again and hence the cycle continues and they are unable to get out of these loan ever.
They lenders tried convincing the union by giving them exact facts and figures regarding their income and expenses but still they were not convinced. Not only this but the lenders of payday loans also proved it to them that there are approximately 10 to 15% of people who got stuck with this problem otherwise they did not see the faces of the rest of the 85 to 90% of the borrowers every again.
Payday advances can be of great help if used intelligently and wisely otherwise they can cause severe financial issues and in some situations it can even lead to bankruptcy of the borrowers of the loan.