There has been a lot of bad press about payday loan companies in the news lately; more and more people are expressing their rage about the so-called unfair lender-borrower relationship. Comedian John Oliver recently did a bit about the payday loan industry, criticising the industry for several “shady” business practices. Although there may be a handful of not-so-reputable companies offering short term payday loans in the industry today, it is hardly fair to assume that all payday loan companies are underhanded companies seeking to harm loan applicants. Read the information below to learn more about why you really can trust some payday loan companies and why said companies are a legitimate financial “move” for many individuals in financial distress.
The Truth In Lending Act
Certified companies providing applicants with short term payday loans are held to a high standard by the federal government. A legislative act called The Truth In Lending Act was put into effect in order to create a set of guidelines that must be followed by certified, legitimate lending companies. If you are interested in taking out a payday loan from a lender that is credible, you may want to make sure they are certified.
Legitimate Reasoning
Much of the bad press about short term payday loans deals with the high interest rates charged by most payday loan companies. Interestingly, most of the media neglects to mention the reasoning behind the high interest rates charged by loan companies. Payday loan companies are well-known because they give loans to individuals whom other traditional loan companies would consider too “risky” to approve. For instance, most short term loan companies do not have a problem with giving loans to individuals with poor credit. However, it would be foolish for any business to take such a risk without a certain degree of “cushion” or protection. Short term payday loans have high interest rates because the companies that give money to high risk individuals are “going out on a limb” to trust a person (a person who may have any kind of financial history). The chance that such an individual should neglect to pay back a loan is relatively high, especially when compared to the risks faced by other traditional lenders. With such a degree of risk, short term loan companies charge high interest rates in order to supply money if the borrower falls through.
Clear Expectations
Even though legitimate payday loan companies make their expectations clear, many individuals fail to achieve the outlined standards given. Therefore, many individuals end up in a vicious borrowing cycle that leads to further financial challenges. Keep in mind that, in this case, the lender is not at fault or conducting business in a “shady” fashion.
Remember that not everything you hear in the press is true; there are, in fact, many short term loan companies who are perfectly legitimate and who consistently help those who are in financial desperation.
