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Payday Loans a Necessity in the Mississippi Delta

As many as 14 states in the country and also the District of Columbia have prohibited payday lending. These states have passed legislation imposing tough terms and limits on payday lending. The US federal government has stepped in too. The Consumer Financial Protection Bureau (CFPB) has proposed regulations in June 2016. These regulations are going to come into practice from 2018.

However, the ground reality is that, there are few options for people who actually need the money.

Reality in the Mississippi Delta

If you travel through Highway 61, you will come across small towns and the fertile farmlands of the Mississippi Delta. There are many fast-food joints, gas stations, discount malls, and several stores that offer quick cash. There’s almost a constant flow of people coming and going to these stores, trying to get cash, and keeping up with the repayments. Most of them won’t get the money they need from a regular bank.

In Clarksdale, for instance, a majority black-town, one in three live in poverty, and this is the only kind of banking available. But payday lending isn’t just restricted to black Americans. You will see plenty of whites, Asians, and Hispanics too across the country. Most of them come from middle to lower-middle class neighborhoods.

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Why a Short-Term Loan is Better

Read why a short term loan is better sometimes when you only need a small amount of money to take care of a small problem in life.

A loan or debt isn’t necessarily a bad thing. Think of all those things you can achieve in life if you had just a few dollars more – all those small happiness’s, little delights. You might have to wait for many years if you don’t take the loan. Why wait? You know you are going to pay it back anyway. Then there can be emergencies for which you might suddenly have the need for some extra cash.

So don’t worry about debt. Ask for the extra money you want. Just make sure that you have a stable job and a regular source of income. There is nothing to worry if you do.

The world moves on debt. Countries take loans, businesses ask for debt to finance projects. So why you should you and me worry needlessly?

What Type of Loan Should You Take

There are two types of debt: short-term, and long-term. Which is the better option?

Long-term debts are mainly for big investments such as a home mortgage. For most other requirements, people usually go for short-term debt.

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US Sees Increase in Women Using Payday Loans

In recent times US is seeing an increase in women applying for payday loans which is very surprising and shows that lots of women in US are now taking responsibility of running a family.

A few years back, it was believed that colored people, Hispanics, and Asians, and those from the economically weaker sections of the society were more likely to take a payday loan, irrespective of their location in the United States. But extensive studies carried out revealed something else. It was discovered that most of the borrowers are white and females. Most borrowers are between the age of 25 and 44 years. That was quite a discovery as it broke many myths about the kind of people taking these loans.

And now, there is increasing evidence to show that the number of women asking for a quick cash loan is actually on the rise. Studies have also revealed that this is probably not just a temporary thing. More and more women are likely to ask for quick cash. Not just that, women are also applying for more cash each time they are applying.

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What is the Payday Loan Extended Payment Plan?

In this article learn about what is the payday loan extended payment plan and how you can avail it.

Payday loans are short-term loans, where you are expected to pay back the amount due on receiving the next month’s pay check. That is, you must pay back in 2-3 weeks time. Most people do this and stay in the right side of the law, and qualify for another loan in time. But sometimes, even those who have the best repayment history can face a temporary situation where they aren’t able to pay back on the due day.

So what do you do then? If you cannot pay back the payday loan on time, then there is no immediate worry for you. There won’t be an upcoming onslaught of debt collection calls. That’s because, there’s something called the “Extended Payment Plan”. Thanks to this, there won’t be any high fees and bank account debits as well.

Protection for Consumers

If the lending agency is a member of the CFSA (Community Financial Services Association of America), they cannot force you to repay the amount. No coercion practices are allowed. The lending company must give you time till the next four paydays to repay the amount due. No extra fees can also be charged for this. All CFSA member agencies should carry the CFSA logo in their websites. It should also be displayed in their office, if they have a physical presence. So look for the blue oval logo to be sure that the agency is a member of the CFSA. Be sure, as not all agencies are members of the CFSA.

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States Where Payday Loans Are Allowed

If you are thinking of taking a payday loan, first, you have to know the states in the US where you can take it legally. That’s because, these quick-cash loans are allowed in 36 states, not all of them. Also, the law regarding the maximum number of loans you can take in a year also differs from one state to another. There are other regulations too that you must know. So it is essential to know the law, before you proceed to accept the loan.

A payday loan offers the much needed respite to all those who are in urgent need of cash. Yes, this is not a long-term solution, but it is best suited to those who are unable to pay their utility bills, must carry out urgent car repairs, or have to pay for some medical expenses suddenly. The processing and approval is very quick. It can happen within 24-72 hours of your application. Even those with poor credit or no credit history can get the loan, as the lending agencies don’t check credit records. There are hardly any paperwork and hassles as well.

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Millennial Turning to Payday Loans in Huge Numbers

People who are born between the early 1980s and early 2000s are often referred to as the “Millennials”, Generation Y or the Millennial Generation – and they are turning to Payday Loans in huge numbers.

A new study now reveals that 42% of the millennials have turned to an alternative financial service, like payday loans. In fact, in the last 5 years, 28% of millennials who have at least college education have taken a payday loan. It also reports that 6% other millennials without college education is seeking these loans. And this number seems to be increasing too. They also discovered that 30% of them were overdrawing their checking accounts. The college educated millennials were found to be between the age of 23 and 35 years according to the results of the study.

The extensive study was carried out by the Global Financial Literacy Excellence Center at George Washington University and PwC jointly. It was titled “Millennials and Financial Literacy (pdf file)”.

Detailed analysis of the study revealed that millennials were struggling to deal with their personal finances, and turning to payday loans as this offered immediate relief. For instance, there was this person from Queens, New York, aged 31, who wanted to open a second jewellery store but had little cash in hand. He turned to a local quick cash provider as it was difficult to get a bank loan.

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How Bank Overdrafts Are Worse Than Payday Loans

Did you know that the largest banks in the country are registering huge profits by checking overdraft fees? This is forcing the country’s poor to “subsidize the rich”.

Often, those with a fund crunch situation need an overdraft. And quite often, these are the same poor people who would take a payday loan to ride over the immediate crisis. But while the payday industry faces criticism, the banks have largely been allowed to carry out their operations as they please. In fact, the banks have been busy actively encouraging people to get an overdraft, so that they can make a profit. For instance, in 2014, the banks raked in a massive $35 billion from overdraft fees.

If you don’t have $50, how can you pay an extra $150? This is a frustration and annoyance, particularly to those who already don’t have enough money.

Banks have been exploiting their customers for a really long time. Legislation has been passed to prevent this, but the banks have always found a way to manipulate the system, as you will find a little later in this post.

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How Short-Term Cash Loans Can Help a Business

Cost is always a key factor for all businesses. The theory of business runs like this – create or procure at low cost and sell at a higher price, the difference being the profit. So when procuring a loan, a business will want to keep the cost low, to keep the margin high. However having said this, “quick” and “easy” could be equally important.

Loans from banks are good as it helps the business keep the costs down. But the problem is, the application process is very lengthy. There is also the long and complicated underwriting process, which can mean that it could be months before the business eventually gets the funds it needs. Businesses cannot wait that long quite often. For instance, there could a need to carry out emergency repairs, without which production might come to a halt. There could be an inventory order for which funds are required fast. Or the business might want to make a timely acquisition.

Picture These Scenarios

You are running a busy clothing store. The holiday season is approaching fast, and you must hire more workers. The cash register just broke, and you don’t have the extra money to hire more people.

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Payday loan is the most popular quick cash product in the United States. More than 15 million Americans are taking them every year now. Who are the people taking these loans, why are they doing so, and from where are they getting their payday loans? Let us take a closer look at a few key findings.

Who Are Taking Payday Loans?

Extensive surveys have revealed that a borrower on average takes about eight payday loans of $375 every year. Surveys have further discovered that about 6% adults in the US have taken out these loans in the last five years. About three quarters of them have taken the loan from a storefront lender. The other one quarter has taken the loan from an online store.

Contrary to what many critics say that these loans are popular among the Asian, Black and Hispanic population, the fact is that, most of the borrowers are white and females. Most of the borrowers are between the age of 25 and 44 years. The ones who are more likely to take the loan are those without a four year college degree, people who are making less than $40,000 every year, home renters, and people who are either divorced or separated. These loans are often a savior to them, as they are able to get ready cash when they need it the most.

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NY Fed Blog Questions Objections Raised on Rollover Limits

The New York Fed website recently published a blog post that has questioned some commonly raised objections about payday lending and its rollover limits. Here, the author questions many critiques of these small-dollar loans, concluding by saying that more research must be carried out before we can convincingly say that the payday lending industry needs to be strictly regimented. We should be careful about rolling “wholesale reforms”, the blogger says. The post is titled “Re-framing the Debate about Payday Lending“.

This post in the New York Fed, has been written by Ronald J. Mann, Robert DeYoung, Michael R. Strain, and Donald P. Morgan. They all have high credentials, and thus, their findings are being deemed extremely valuable.

Mann is a Professor of Law at the Columbia University. DeYoung works as a Professor in Financial Institutions and Markets at the University of Kansas’ School of Business. Morgan is an Assistant Vice President in the New York Fed’s Research and Statistics Group. Formerly with the NY Fed, Strain is now the Deputy Director of Economic Policy Studies. He is also the resident scholar at the American Enterprise Institute.

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