Pay Day Lending - is it ever ok?

Take_it_like_a_man,_sonny

endora wrote: »

The question is, if he hadn't been able to pay you a week later, would you have charged him another £50 to roll over the loan? Would you charge £3 for every time you 'attempt to collect' - up to 100 times in a month? Would you charge 4000% APR?

Herein lies the rub! PD lenders are legalized loan sharks! :mad::mad::mad:

Direct Debit due at bank for £20. Borrow £50 for ten days, cost £8.
Direct debit missed at bank, cost £35.

Does not take a cse in maths to work out.

Problem is those who complain about the interest rates are the ones who sit on there silver and do nothing, yet keep those that need the loan in abject poverty.

As for APR, it does not, in most case, truly reflect the true cost of the loan. You quote indiscriminately a rate of Daily Excess proportions, yet fail to see the true cost, which at rhe bank for a missed payment is far in excess of your named loan shark.

martintwin

My problem with this whole payday loan debate that we have here in US is that if payday loans could be cheaper they would be. There are no barriers to entry in this sector - in short, there are no holds for competition to work and drive the rates down to its competitive levels. The rates are at their competitive level. Why people keep tripping is because they want cheaper money and that payday loans are expensive and keep them hostage of their own mistakes. I do not see a legit case against payday loans. The only legit reason I can think of is to protect people from their own bad financial decisions. But if that's why we are going to regulate payday loan lenders, then we should limit the number of cigarettes people smoke per day, number of sodas they drink, number of hours they play video games because all these can be considered harmful behaviors.

SaLoGo

martintwin wrote: »

But if that's why we are going to regulate payday loan lenders, then we should limit the number of cigarettes people smoke per day, number of sodas they drink, number of hours they play video games because all these can be considered harmful behaviors.

How on earth can they be limited? There's a recommended to how units of alcohol people should drink each day but some people don't stick to it! You can't dictate how many cigarettes people should smoke or how many hours of video games they should play. It's just not going to happen, just like they will probably never properly regulate PDL's.

jon1965

martintwin wrote: »

My problem with this whole payday loan debate that we have here in US is that if payday loans could be cheaper they would be. There are no barriers to entry in this sector - in short, there are no holds for competition to work and drive the rates down to its competitive levels. The rates are at their competitive level. Why people keep tripping is because they want cheaper money and that payday loans are expensive and keep them hostage of their own mistakes. I do not see a legit case against payday loans. The only legit reason I can think of is to protect people from their own bad financial decisions. But if that's why we are going to regulate payday loan lenders, then we should limit the number of cigarettes people smoke per day, number of sodas they drink, number of hours they play video games because all these can be considered harmful behaviors.

I think you may have largely missed the point, or at least my point. What so enrages me about PDL's is the way they treat people who fall into difficulties. Not only does the debt spiral with charges that are almosy beyond belief but they harrasse and threaten.
You do not say if you are an American or a Brit but over here there is definitely a case to answer as these guys sail so close to the legal line they frequently cross over it.
I do not for one inute believe that PDL's are at their competitive rate largely becuse people who want /need payday loans are often so desperate they do not care about interest rates etc.
I agree 25 on 100 for a month may look reasonable, but they then charge you stupid processing fees if you need the money that day, and some even charge that by default i.e you have to opt out if you want it in 3 days

KingElvis

SaLoGo wrote: »

We did what was right for us at the time. We borrowed £300 for a few days to secure our dream venue and £200 to put towards a TV. How's that different to putting it on a credit card?

Yes, but the damage those pay day loans do to your credit history are horrendous...once your dream wedding is over and if you later want a mortgage or a proper loan or credit card these things will come back to haunt you like a dead bat hanging round your neck.

Serious lenders see payday loans as a sign you cannot budget, you cannot live within your means and you're financially baffled.

Sorry but those are the facts.

If you care not for your long term credit history (and six years is a long time if you can't wait a week for a tv set) then I suppose they can be useful.

jon1965

As most loan applications are automated is there and evidence that PDLs have an adverse effect on your credit rating?

Apples2

jon1965 wrote: »

As most loan applications are automated is there and evidence that PDLs have an adverse effect on your credit rating?

Depends how you define "adverse".

If you have a good credit file and start using PDL, there is a firm record that you are unable to make your wages last from one month to the next, hence the very definition of a PDL.
In this scenario, it would have an adverse effect as they can see you cannot manage money.

If your credit file is shot to pieces, riddled with BR's, CCJ, defaults, arrears, overdrafts etc. Then the successful repayment of a PDL shows you can manage to repay "something" on time.
This wouldn't mean an acceptance by any means but a succesful deal is better than 100% failures.
From that angle it could be good for your credit file but you will still be a Country Mile away from any acceptance for credit.

jon1965

What I was asking is, where is the specific evidence that by using a PDL has adversley effected someones ability to obtain a mortgage or other "proper" credit. I admit it might be difficult to find as by their very nature most people who use PDL's have an adverse credit history.
The answers seem to be subjective . It could be argued that by paying the occasional PDL on time that would show that you use available options to responsibly pay for emergencies.
Some people make the statement that all creditors are looking for is a good payment history, on time and the full amount due.
So again I am asking, not in a confrontational way but for information, is there any objective evidence?

Apples2

jon1965 wrote: »

So again I am asking, not in a confrontational way but for information, is there any objective evidence?

You won't find any.
Lenders don't disclose the way they assign risk, if they did, anyone could manipulate it to their advantage before applying.

All lenders care about is if you are likely to repay the loan you are applying for without problems.
You are going on again about "lifes little emergencies" as if only a few people suffer from them, nobody cares, all it shows is that you are struggling and have to rely on borrowing NOW, let alone if they were to throw even more debt at you to service.

This isn't rocket science, if you can't make ends meet, why would they decide to give you a great, low return product? They don't NEED to take this risk.

jon1965

My last comment on this
So the comments that they will damage your chances of getting proper credit are entirely subjective based on opinion and not fact.You admit yoursef that noone knows how lenders decide on risk so you are not in a position to make such a statement.
I am not saying they are not true, just that the phrasing of WILL and not may is wrong.