Should Pay Day Loans Lenders Be Banned?
Sixteen States in the United States of America have already banned pay day loans lenders while the debate is still on whether other states should also ban them or not. It is an open fact that these loans are extremely costly and risky for consumers. Most borrowers eventually get trapped into a vicious cycle of rapidly growing debt. Therefore, it seems justifiable to ban these types of lenders. Following is a brief rundown on some of the reasons why many people (including low-income consumers who are main target for this predatory lending) are against banning this form of lending. Is Banning Payday Lending Like Interfering With The Free Choice Of Consumers? Payday loan companies are strictly against any laws and regulations that states are enforcing to payday lending. Lenders claim that consumers are actively choosing to use payday loans, which is an indication that these loans are actually helping them with their finances. So, as per lenders banning payday lending is like stopping consumers from
making a free choice. However, this logic does not make any sense. The main target customers for pay day loans lenders are the people with low income who do not earn enough to meet even their very basic needs, such as food, clothing and house. It is not like they make a free choice. They borrow
these loans because of temptations because they often fail top think of a better alternative. But, choosing an extremely high cost loan to avoid being evicted or going hungry is not at all an acceptable choice. They do need money at the time of crisis, but they do not need it at the cost of getting trapped into a serious debt cycle. Are There Better Alternatives To Payday Loans? Many people have the assumption that banning pay day loans lenders is not good for consumers because they will lose an ‘easy’ option to borrow money in times of need. As mentioned earlier, payday loans might be easy to borrow, but they are so much costly that can even make low-income consumers bankrupt. And yes, there are plenty of better, significantly much cheaper alternatives to payday loans. Payday lending is already banned in so many states, and in most developed countries,
there is in fact no concept of payday lending at all, but low-income consumers residing out there are not dying of hunger because of it. It is just because there are always better alternatives to high cost payday loans. Some examples include getting a short-term loan from credit unions, using debt consolidation services, working overtime or getting a side job, and many others. You can look into the ‘payday alternatives’ section on this blog for a world of possibilities on how you can arrange quick fund in times of temporary financial crisis. Overall, pay day loans lenders are actually making big money by trapping more consumers into debts, which is obviously not an acceptable thing. Therefore, such lenders must be banned.
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