The Role of Fast Payday Loans in your Financial Portfolio

Fast payday loans have gotten a lot of attention in some markets recently. Unfortunately, it hasn’t all been the good attention that these services deserve. Fast cash payday loans aren’t for everyone, but for an average household with a particular short term cash flow problem, they certainly fill a need. They provide loans fast, with minimal paperwork and very lenient credit requirements.

In today’s restrictive economy, with the recession still in full bloom and no end in sight, the average person cannot get a loan at a bank. That’s just a simple fact. Unless you have valuable real estate to pledge as collateral (and most of us do not), or unless you want a large loan which will be repaid over a period of years (and that isn’t what most people need), the bank simply won’t help you. They make their money by lending money for years, not weeks. They have no interest in doing all the paperwork and credit checks and background checks their policies require only to have their money returned in 8 days when you get your paycheck. They wouldn’t earn enough in interest charges to pay for their time.

Quick payday loans fulfill a very specific market need. They are made in a matter of hours, not days, so they are perfect for immediate needs (such as bill payments, buying groceries, making a car payment on time, etc…). The payday loan companies want paid back in weeks, not years, so that also fits what most customers want to do, which is borrow money only until they get paid. These companies have faced criticism because the fees they charge would be considered high, if they were interest charges. But they are service fees, not interest charges. While you might not be willing to pay 30% interest on a loan, you probably WOULD be willing to pay $30 to borrow $500 for a week and a half. It’s a reasonable fee, and it’s certainly less expensive than bouncing even a single check.

When viewed in this light, payday loan companies seem to fill a need and to charge a reasonable fee. The people who are most critical of payday lending practices are the people who never need short-term loans, who can get a loan from any bank they walk into and who, as often as not, make money from the banks they want to force everyone to use. There are, however, some people who should NOT use payday loan services. If you use them constantly, week after week after week, then that should be a strong indication that your financial needs are not short-term. You simply aren’t making enough money, or else your bills need to be rearranged to a different payment cycle.

However, when used responsibly, and on an infrequent basis, there is nothing wrong with a short=term loan. And when viewed a service charge over a short period of time, the fees these companies charge is not unreasonable, nor is it unaffordable for the average family. Payday loan companies have a place in the average person’s financial portfolio.