Payday loans are still quite popular amongst the people. There are many reasons as to why people consider taking out one, in case of emergencies. However, very few are aware of the actuality and the problems in relation to the payday loans. You won’t even realize that you are deep into a problem, until you take out a payday loan. Though, it cannot be denied that the payday loans are easier to get and proves to be even more helpful in case of emergencies, as you aren’t required to prove that you have good credit; these can easily lead you into unmanageable debt too. Yes, it is possible to pay down the loans through payday loan consolidation, but the harassment which you may have to go through is totally uncalled for.
Why do people use payday loans?
In majority of the cases, it was seen that not only the people who are in dire financial crisis simply opt for payday loans, but the ones who have high affordability, make the mistake of obtaining a payday loan too. This happens mainly in times of emergencies. When in an emergency, people lose the ability to think and consider what the immediate action is going to lead you into.
So, the main reason people use payday loans is because of certain emergencies, and shortage of money in the middle of the month, if they do not have good credit and so on. There are even some people who would use the payday loans in order to cover the daily expenses, under certain situations.
What are the payday lending regulations about?
It was seen that in most of the cases, the payday loans were just scams. Therefore, the payday lending regulations were introduced, so as to help the borrowers handle the scam companies. This was also aimed at doing away with the payday lending practice as much as possible.
Therefore, in most of the states, payday lending facilities and institutions were declared to be illegal. The states where payday lending is still illegal are Arkansas, Connecticut, Georgia, Maine, Maryland, Massachusetts (not strictly illegal but highly regulated), New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont, and West Virginia.
Other than this, there are also the states, which have the usury law, even if they have not yet declared payday lending as illegal. As a result of the usury law, there are some regulations on the interest rates that the payday lenders can charge. However, there are also some lenders who have formed alliance with banks and are offering the fast cash loans through those banks.
How can payday lending regulation affect its usage?
If the reports of 2012 are to be believed, it would be seen that the regulations and the legal protections has helped a lot with the decrease in both the online payday loans and any other forms of payday loans coming from other sources.
It was seen that the states with the most stringent regulations, it was only 2.9 percent amongst the adults who reported usage with regards to the payday loans. This is the report based on the last five years (including all of the types). In comparison to this percentage, usage of the payday loans on an average is 6.3 percent in the stares where there are moderate regulations and its 6.6 percent in the states where there are almost no regulations.
However, people are still reporting that they are getting scammed by payday lenders over the phone, where they call and harass for money.