The Arguments Against Payday Loans

There are many people who might more than often find themselves in a situation where they will need money.  In a sense, there are many options that will give you the funds you need.  You can borrow from a family member, from a friend and perhaps ask for an advance from your boss.  Regardless of the choices that are given to you, it may come to appoint where you have no choice but to take out payday loans.  These debt instruments are those considered by many financial experts as predatory loans that will cripple the finances of any person.  However, there are definitely some others out there who will argue for the use of the payday loan lenders.

The most basic argument that people for the loans will have is the rates are actually for short term debts rather than long term ones.  For example, there has been an argument that payday debts interest will be computed annually.  The pro payday debts argue that to compute for the interest at such a time period it will no longer be considered as a short term debt.  The usual time frame of the loan is around fifteen days to 45 days.  Such time frames will lead to it being considered as short term debts.  When you compute for a yearly annual interest, it will be a long term debt.  Hence, for the payday debts people will prefer to have the loan than take a full year term debt.

Another argument for the interest rates is that the increased rates when extended will not be compounded unlike the 12 month term loans.  Unlike the personal loans and the other types of loans, the interest is charged according to the compounded value of the principal.  In addition to this, there have been debates that this has improved the general welfare of those who have accessed the loan.  In a sense, there might have been some improvements, but they would generally depend on the borrower and his initiative to pay for the debts on time.

As a whole, the loans will benefit those who want to spend it on real emergencies.  The loans are only considered as predatory because most who apply and use it will abuse its privileges.  However, if responsible borrowing has occurred, there is no reason why the payday debts will fail to serve its purpose of being emergency funds for the borrower.