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Payday loans have become the easiest
and most convenient way to get a cash loan these days. In fact they are
becoming more and more popular as time goes by. Unfortunately there seems to be
a growing problem with payday loans, and both the lender and the borrower are
to blame for this.
Payday loans have some good points,
one of them being that they are a convenient short-term solution to a cash flow
emergency. The only problem with that scenario is that borrowers take loans
that they cannot afford to pay back. Here the lenders are to be blamed as well
because they do not do credit checks to establish if a borrower can afford to make
the repayments.
Repeat borrowing then leads to
escalated costs which can then make the loan very difficult to repay. The
lenders are getting away with these unreasonable costs in the states where
there is no usury ceiling. An estimated 70% of loans are repeat loans because
the borrower needs a new loan to repay the old one.
According to statistics a borrower
will take out an average of 8 to 9 payday loans annually. Some of those would
be to repay the old loan. This is something that borrowers need to avoid,
because the costs can become higher than the original loan. This results in
unavoidable hardship on the borrower and their families.
While these loans may be a
convenient and fast way to get cash, statistics show that borrowers are taking
loans that they cannot afford to repay. Almost half the borrowers default in
their first year of taking out payday loans. This is a clear indication that
borrowers need to be more careful when taking out these loans, and avoid them
at all costs if they cannot afford to comfortably repay them within the agreed
terms.
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