Can the economy withstand payday loans?
One of the most recent economic ironies is the new surveys’ findings that the nagging recession affects the people worst when they have fewer financial resources. It is commonly expected that those who have a lot of diversified investment and financial resources get most hurt by economic recession. The study also goes ahead to reveal that payday loans online have been a common source of financial depletion the populace with less income. Apart from the three digit interest rates that borrowers have to pay to lenders, it shows that borrowers develop a habit that makes them borrow often thus paying a lot of their money in interests leaving them with none. Payday lending is estimated to drain at least $1 billion from the communities that form borrowers. This weakens their financial status thus leaving them with none to invest as well as rely on such loans on cycling basis.
The research that was conducted and written by the Insight Center for Community Economic Development, further reveals the negative implications of these high interest loans that are not governed by strict laws in almost two thirds of the states. In 2011 alone, borrowers paid $3.4 billion to payday lenders in interests alone. The study shows that if consumers had such an amount at their disposal as discretionary spending, it would have resulted in a $6.34 billion growth in economic activities as well as create almost 79, 000 jobs. While comparing the same amount on the hands of the non bank payday lenders, it just added to the national economy $5.56 billion and resulted in creation of 65, 000 jobs. By analyzing these figures, it shows that payday loans business results in the loss of $774 million in economic growth alone as well as the loss of 14,000 jobs. Through Chapter 13 bankruptcies, that is an excess of $169 million lost. This is a waring trend that has informed the decision by most states to curb payday lending.