The Debate Over Payday Cash Advances

There are times when a little financial help is needed to get past the proverbial bump in the road that might otherwise be then end of a well thought out budget. Before, and short of selling personal belongings to a pawn shop for next to nothing, all anyone could do was hope for a handout and otherwise hang on until the next paycheck arrived. In many cases today, payday cash advances can help tide you over until the next payday.

Referred to by some as payday loans or cash advances, these types of loans are most often small in nature and are generally paid back within two weeks. Loan amounts are often the amount of the borrower’s next paycheck or can be arranged against a credit line. Regardless, they are provided for the short term as a way to get from a financial shortcoming to the next job check.

So how does it work? In the states, these loans are available in traditional brick and mortar businesses and online. The borrower will fill out an application, provide the required documentation and provide a post dated check for the balanced of the loan, usually due in two weeks. Interest rates in the United States are anywhere from 15 to 30 percent of the loan for a two-week period.

These types of loans are available all over the world, so many are surprised when they find out that they are not available in all 50 states. In fact, only 37 states allow this type of loan. These states generally regulate the practice themselves, however the federal government does provide some guide lines and some restrictions. There is a limit, for instance, on how much can be loaned to those in the military.

So why then are some of the opinion that these loans should not be allowed? These people view payday loans as predatory. They point to the 15 to 30 percent fee as what amounts to over 750 percent interest when calculated annually. The are of the belief that these loans exploit those in poverty and with financial burdens, and they dislike the aggressive collection practices.

Still, there are advocates, and they cite studies that show no evidence of any linking between increased bankruptcies or other financial issues. They point out that these loans often provide household essentials for many families who would fail to survive otherwise.

Debate continues over the validity and legality of payday cash advances, however they will continue to be used by those in need where they are available. Those that agree with the practice and those that do not will continue the debate into the foreseeable future.

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