Another PEW study has found some interesting data on how fast cash advance loans are chosen and paid. PEW’s Payday Lending in America series once again has studied the behaviors of short-term loan borrowers in order bring more light in how the industry affects the average person.
Most direct lenders would tell you that a person who applies for one of their direct cash advance loans is having financial troubles. It’s an obvious answer, why else would someone be willing to pay the fees behind the loan? What the PEW study found was a more in depth answer. They calculated that 58% of the fast cash users were not just experiencing temporary emergencies but rather troubles keeping up with monthly expenses. This finding supports PEW’s first report which touched upon how users would rather take out a short-term loan rather than have to work at cutting back on their lifestyle.
In order to redirect these findings, borrowers will need to work on their budgets and cutting back on monthly expenses. This could mean trading in a luxury car for something more affordable, downsizing their home or cutting out household luxuries like internet, cable and movie channels. The more money they can keep in their bank accounts the less chance they will need to use a short-term loan.
Cutbacks will also help correct PEW’s second finding that only 14% of those borrowers studied can actually afford to pay the loan back in full. It is tough to repay a loan plus fees out of one paycheck. The remaining 76% need to be creative to find the extra money without leaving their budget unguarded. Some may have a family member or friend who could help while others may have to sell off household items.
The PEW study also touched upon the mindset of a person seeking out direct cash lenders. The majority of borrowers rely on the lenders to give them accurate information about the loans. If a borrower ends up choosing a lender who does not use best practices, there may be hidden costs which will create additional hardships. It takes many of these borrowers up to 5 months to pay off the loan. The $375 loan ends up costing more than $500 to repay.
Desperation is often a cause for someone to obtain a cash advance loan online. The study showed that 37% of the borrowers were so desperate for money that it didn’t matter what the terms and conditions of the loan were. They would take the money no matter how expensive it was. Stressed financial situations create the potential for poor decisions with short-term loans as one of the options.
It is very important to set up a system for your money when things do go bad. Creditors step out of the playing field when bad credit history plagues a person. There are a few other choices for alternative money solutions, but who is to say which one is better than another? Preventative measures continue to be the best way to safeguard money problems. Unexpected financial situations will influence a person’s bank account. How a bank account is able to persevere under tough times will directly affect future finances.
The average person will need to safeguard their finances by creating their own emergency fund and cutting back on expenses so their monthly budget sits comfortably in the realm of their monthly income. It does take education for borrowers to fully understand a short-term loan. You can try to prevent a borrower from using cash advance online loans, but if the person has no other option to get money help they will find their way back to the application page the majority of the time.