Cash advance loan debt is just like any other - the lender wants to get paid

The payday loan industry, also known as the quick cash or cash advance loan industry, is frequently in the press because of the perception, valid or otherwise, that it preys upon those who can least afford to pay. That may be true; most customers claim that they took out such loans because no one else would lend them money. While there are a few credit unions that are offering alternatives to payday loans, most other formal lending institutions are shunning the short term lending market in favor of traditional lending. That leaves most people who cannot borrow elsewhere with few other choices. It’s take out a payday loan or do without.

As we have pointed out before, payday loans can be expensive. With interest rates that average about 400% per year and can run as high as 1000%, it is not a cheap source of money. Many people who take out such loans find themselves unable to repay at the end of the two week lending period and are forced to “roll over” the loan for another two weeks, which incurs another fee. Many borrowers even end up borrowing from one store to pay an old loan owed to another. Sooner or later, the borrowers will have to pay up, even if their hundreds of dollars in debt has ballooned to thousands of dollars owed.

If not, the payday loan store may sue them.

The industry claims that 97% of their customers repay their loans, but it looks as though more and more of them are failing to do so. The number of lawsuits instigated by such lending stores has nearly quadrupled in the last four years. The lending industry claims that the increase in lawsuits is due to the increase in business, and it is true that the industry is lending more money than ever. But it is also true and even more likely, that more and more people are simply unable to keep up with their payments under the burden of the 400% annual interest.

People who take out such interest-heavy loans do not, as a rule, have a lot of discretionary income. The fact that they don’t have the money today suggests that they probably won’t have the money in two weeks, either. And that leads to the never-ending cycle of borrowing again and again and again. Stories of $300 loans that blossomed into $3000 worth of debt are common.

While the industry says that it will work out payment plans with customers who are in over their heads, the high interest loans are themselves payment plans. If customers cannot repay under the existing terms, then the lawsuit is the inevitable result. Customers who lose in court will have to pay court costs and attorney fees, as well.

Anyone thinking about taking out a cash advance loan should be aware of everything that comes with it. That may include a trip to court.

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