short-term lending not predatory
Eyebrows raise when you hear about any interest rate on credit more than 30 percent. If you're discussing payday or title lending, the implied interest rates (in annual percentage rate) can be above 500 percent. Put in those terms, short-term consumer lending markets sound immoral and predatory.
With a first impression like that, it is no surprise that the short-term consumer lending industry is often the target of restrictive regulation proposals and public ire.
However, looking more closely suggests that these loans are smaller in both total market size and individual interest expense than the APR interest rate would suggest. And these markets receive fewer complaints from their users than any other lending industry.
In a new dataset collected during summer 2011, I surveyed all of the Utah payday and title lending firms, as well as some pawn lenders. The data include average interest rates (in APR), average loan amounts, average duration of loan, default rate and total principle lent for more than 50 percent of all the payday and title lending store locations in Utah.
A response rate of more than 50 percent makes this survey one of the most representative of its kind. The dataset also contains a level of detail that no other source in the state has available.
The first gems that emerge from these data are the respective sizes of the Utah payday- and title-lending markets. Payday lenders in Utah issued an estimated total of $280 million in payday loans in 2010, and Utah title lenders issued about $35 million of title loans. Compare these to the size of Utah's more traditional revolving and non-revolving credit markets of $6.4 billion and $10.8 billion, respectively, as reported in a 2009 Utah Foundation publication.
In addition to the fact that the Utah payday and title lending markets are small potatoes compared to the more traditional credit markets, they also differ in duration of loan and potential interest that can be charged.
payday loans market - News
The first gems that emerge from these data are the respective sizes of the Utah payday- and title-lending markets. Payday lenders in Utah issued an estimated total of $280 million in payday loans in 2010, and Utah title lenders issued about $35 million
According to spokesperson for the company, "Consumers are asking where to get a long, how to get a personal loan, can I get a loan. They are usually trying to find a emergency payday cash loans or what is called a consumer loan or fast cash loan.
“These so-called legal loan sharks are targeting our poorest and most vulnerable and peddling misery. “The UK Government must intervene in the market to cut down the numbers of people falling into financial misery. “We also need to promote alternative,
By Sarah O'Connor, Economic Reporter Behind the growing online payday loan market is a network of brokers and opaque ownership structures that can make it hard for customers to shop around for the best deal or know from whom they are ultimately
Damon Gibbons, chief executive at the Centre for Responsible Credit, said it was 'woeful' that the latest data on the payday loans market at the Office of Fair Trading, the sector watchdog, dates back to 2009. He said the rapid development of the
Don't get stung by a payday loan this Christmas- Moneyfacts.co.uk
Payday loans have exploded onto the UK financial scene since the credit crunch as banks and building societies have become more choosy about who they lend to, and how much.
But they should only be considered as the very last resort – and certainly, using a payday loan to help finance Christmas is not the best idea.
Payday loans, a financial outcastIn financial circles, payday loans have somewhat of a bad reputation. With many offering four-figure APRs, these loans service a gap in the market that has been abandoned by mainstream lenders since 2008.
Although in some cases short-term borrowing from a payday lender can be less expensive than an unauthorised overdraft, the interest charged is still eye-watering.
I don’t disagree with payday loans, far from it. The concept is a good one, and serves a very real need. But the market being serviced is also a vulnerable one and needs to be treated with the utmost care and consideration.
As lenders of last resort, payday loans are a financial product used by people at their most desperate. At worst, they could exacerbate an existing debt problem, or create a whole new one.
And is the payday loans market actually servicing the needs of its customers? Or is it, in the absence of any alternative, simply cashing in?
The Office of Fair Trading has recently reported that payday loans are now more complained about than credit cards, with complaints having risen (like the market itself) exponentially in 2011.
Marketing must be reined inThe other big problem is how payday loans are marketed. It’s aggressive – with convenience emphasized and the amount you pay back downplayed.
Control is another lure some payday lenders use (being in control of how much you borrow, and when you pay it back). Whilst flexibility to repay is a key advantage of a payday loan, flexibility in the hands of vulnerable, inexperienced or debt-prone borrowers can be disastrous. To them, flexibility is not empowering – and it’s certainly not being in control.
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