Payday Loans - The Right Tool-

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					I am always intrigued by plumbers. I admit I 鈥檓 not much of a handyman myself
but I always felt that I was familiar enough with tools that I could look at one and
immediately assess its value and usefulness. But whenever I have an emergency at
home where I need to call a plumber, he invariably comes up with a new
weird-looking tool that I never saw before. Sometimes I ask him the name of the tool
but I can never remember his answer because all I am thinking about is how
something so awkward could possibly serve a useful purpose. And more often than
not, I am pleasantly surprised when I see that the plumber knows exactly how to put
the tool to use so that my dreaded emergency gets solved!
  I thought about plumbers recently while I was reading an article about the payday
lending industry. There 鈥檚 been quite a debate going on about payday loans and
whether they are good or evil. There are good arguments on both sides and after
reading many of the pros and cons, it struck me that just about all the arguments I saw
on both sides were valid. I really did not disagree with any of the arguments
themselves, only with the conclusions. I began to realize that payday lending is
neither good nor evil; it is merely an awkward-looking tool. If used the right way, it
can solve the right emergency. If not, then it can be very useless.
  Payday loans are intended as short term credit loans. If used as intended, they can be
the best way to fix a temporary financial hardship. However they can also be easily
abused. For one thing, it is important to pay them off promptly. Rolling them over
several times can turn a good tool into a bad one quickly. Also, when considering a
payday loan, it is of utmost importance that the borrower deals with an ethical and
trusted lender. Payday loans are best if you need between $100-$1500 very quickly,
you can pay it back in a short period of time (2 weeks or less) and the loan will help
you avoid credit card fees, bank overdrafts and taking your possessions to a pawn
shop. Payday lending exists because it provides the kind of tool that can 鈥檛 be
found elsewhere. In these days of foreclosures, bad economic times and disappearing
credit, there is sometimes a need for a very quick emergency borrowing option that
doesn 鈥檛 entail the very high fees charged by banks and credit cards.
  However there are many that feel that payday lending should be restricted. Professor
Todd J. Zywicki of George Mason University, in a 2009 paper entitled 鈥淭 he Case
against New Restrictions on Payday Lending 鈥 ? spoke out against placing
restrictions on payday lending, arguing that 鈥渕 isguided paternalistic regulation that
deprives consumers of access to payday loans would likely force many of them to turn
to even more expensive lenders or to do without emergency funds 鈥? And along the
same lines, Dr J. R. Clark, University of Tennessee Chattanooga, writing in the
September 2, 2008 issue of Exchange Magazine, points out that 鈥渢 here is
significant academic and market evidence that high-interest lending such as payday
loans, despite their considerable 鈥 ?some would say astronomical 鈥?expense,
increases the welfare of borrowers. Predatory loans, on the other hand, are loans
obtained by the lender through deception or fraud, and do not enhance the welfare of
borrowers. It is a disservice to the public to confuse loans which are truly predatory
with those that are simply expensive.鈥? What type of consumer makes the most use
of payday loans? Contrary to a common perception that payday lenders target the poor,
recent findings seem to indicate that payday loans are attracting more 鈥渕 iddle class
鈥?customers. Marketing research data published by Comscore in its July 2010 issue
of ComScore Marketer showed that 鈥渢 he largest percentage of (individuals
seeking short-term credit on the internet) earn between $50k-$74k.鈥?
  The next time I think about payday lending, I am going to put the subject in its
proper perspective by remembering my plumber and his tools. The tools do not exist
so that I can love them or hate them. They exist so that a very specific problem can be
solved. For that purpose they are wonderful. For any other purpose they are useless. A
payday loan is the awkward-looking tool that I can call upon if and when I really need
it. And just like the plumber, I am the one in control; if I know how to use it wisely,
then I can definitely make it work to my advantage.


 After seeing first hand the trouble borrowers get into, Sara Coleman, who works for
an online payday loans lender, has made it her mission to teach borrowers the right
way to borrow money as well as establish a firm financial foundation.

				
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posted:2/24/2011
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