Payday loan companies have faced more than a fair share of criticism over the past few years. From anger surrounding the high interest rates entailed with the practice, to accusations of insufficient financial background screening for borrowers, the practice has been deemed unjust. However, with countries across the world suffering from mild austerity, with even the best mortgage rates causing many looking to get on the property ladder much issue, there is much to suggest that we as a country need quick fire loans a lot more than many critics would have you believe.
The view from the critics
First and foremost, those who are against payday loans point out to the fact that they come with extortionately high interest rates. However, it must be reminded that those who taken out such loans do so safe in the knowledge of the interest rates and the hardships high interest rates bring forth.
Furthermore, it is said that a lack of financial background screening is rife in the institution of payday loaning. Now, on this note it must be reminded that those who take out payday loans are of course in desperate need of money. Many of those in desperate need of money have a poor financial history and therefore choose payday loaning in the knowledge of not being able to borrow from banks through a credit card. In addition, bank lending has decreased significantly in recent years due to the recession and it is therefore actually a good thing for those in desperate need that few financial background checks are made.
If payday loan companies were to check and judge the financial backgrounds of borrowers, then many people in need of a loan would be prevented from borrowing.
It’s fair to say that times are hard at the moment. The world’s economy is in an unfortunate state of post depression, jobs are scarce and wages for those lucky enough to be working are low. All across the world the pinch is being felt: a Canadian mortgage calculator recently suggested the nation’s mortgage rates are at their lowest for years, the European sovereign debt crisis ever deepens and even in China the economic growth rates have plummeted in comparison to previous years
On a smaller scale, the effect on everyday people is substantial. The amount of emergency food handouts has risen to record levels, while according to reports; more and more children are going to school hungry, due to a lack of nutrition and food available at home.
It is in this climate that payday loans are essential in providing people with a way out of their financial distress that doesn’t involve illegal money generating methods such as drugs, prostitution or loan sharking.
Many of the people forced to take out payday loans suffer from crippling poverty and have no choice but to.
It is not the practice of payday loaning that we should protest against. It is the weak economy which has forced people with little legal options but to take out a payday loan.