Payday Loan

Topics: Loan, Debt, Usury Pages: 1 (267 words) Published: May 16, 2013
Payday loan
Payday loan is also called payday advance. It is a small, short term unsecured loan. It is also referred as cash advances. Cash provided to the people on some pre-arranged credit lines. It depends on consumer previous payroll and employment records. It means that credit line is set for each customer separately according to its previous earning and its ability to repay that loan. The interest rate on this type of loan is very high. To prevent excessive rate of interest jurisdiction has put a limit on annual percentage rate which charged by lenders. Low income group who have very few assets use it and therefore they are ready to pay high interest on the loan. An economy that is very terrible and has tough credit lines encourages the low income group people to take such kind of loans. Some author says that payday loan is bad and it prey the poor people. Through this loan a poor becomes poorer and lender becomes richer. The person who needs some money for starting its business get the cash advance and start its business in a poorest communities where there business cannot run and they suffer loss. The maturity date of loan is very short just three or four weeks. So when he incurs loss and have not enough earning to payback that loan he re borrow again and again to run his business circle. In this way he trapped in loan and re borrowing. Payday lender claims that they provide a valuable loan to them otherwise the poor people have no access to credit.
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