Ethics and Morality – the Payday Loans Industry

A Payday Loan is a unique type of financial product that has garnered a great deal of media coverage over the last decade or so. Why has it garnered such publicity? What is it about Payday Loans that arouses such passionate vitriol from certain segments of the population? Payday Loans have received a great deal of publicity mainly because they are used as source of credit for people from lower-income brackets and are, more often than not, the only form of credit open to such people. Because of this, Payday Loan Companies have achieved a great deal of notoriety and have been framed as something of a Sheriff of Nottingham figure, particular in relation to the APR that accompanies your average Payday Loan.

Payday Advance Loans offer financing to certain segments of the population that otherwise have no options available to them. Payday Advance Loans work by offering a small lump sum of cash, in the UK this sum is typically up to the value of £750 but sometimes higher, in exchange for an agreement signed by the debtor that concludes the money must be returned to the Payday Advance Company by a specified date. That date is usually one in the short-term future – the average Payday Advance Loan last no longer than a couple of weeks. The main arguments levied against Payday Loan Companies include the methods used by Payday Loan Companies to collect outstanding debt, the extortionate level of APR charged and the target markets that so many Cash Advance Companies choose to direct their products at.

However, clear and transparent justifications can be made in favour of the Payday Advance Industry against the arguments listed above. Firstly, without high-interest rates, the market risk from lending to an unqualified borrower would be too high. This would eliminate the possibility to offer Cash Advance Loans to people looking for a short-term solution to imminent or current financial difficulties. The high-interest rate is thus necessary for the industry to function effectively and off-set the risk involved. The recent sub-prime mortgage crisis only reaffirms this point. Secondly, without Cash Advance Loans, the unqualified borrower would have very few alternatives available to them. Providing the borrower pays off the debt as and when it’s due, there is very little risk that the borrower will amass insurmountable levels of debt on top of their initial loan offering.

Mark Jang is a renowned author of finance articles and in particular, on matters relating to Payday Lending. For more information on Quick Cash Loans, please visit Loans Till Payday