Do you fit into the target market that short term lenders are focusing on? Do you live paycheck to paycheck? Are you a single parent with several mouths to feed on a middle class salary? That’s right, people with financial needs that may occasionally exceed their weekly salary are the perfect candidates for short term loans. That’s a lot of people.
There are upwards of 25,000 short term lending companies who are getting quite fat on needy people who are in need of a small boost. The problem is that most of these people are not as cautious as they could have been. I’m not talking about extravagant spenders, this is about average people who may need a little extra cash to help with the bills, or purchase a medication in an emergency.
In many cases short term loans are a blessing, they can get you through a tough week. However, if finances are tight and after paying off the loan and the 12% interest you will find yourself short… again. Now you are off to the lender for round number two. The typical short term borrower takes out an average of 8 payday loans a year, each with rates up to 20%. It becomes a cycle, and it is difficult to get out. In essence, many of these people are taking out continual loans to pay their bills but because money is so tight the interest just keeps putting them back into the same situation month after month or week after week. 8 loans for $500 with a 12% interest will put you $384 in the hole, for nothing. Some people get into this cycle and stay there for years at a time!
The short term lenders offer wonderful incentives to capture repeat customers, Take 5 loans and get the 6th one free. I hear they offer landlords of low-income housing cash in order to get referrals.
When you apply for one of these loans you will notice that there are no hidden fees, no fine print, they’ll take anyone. They will lend to victims of bankruptcy and those who have bad credit. In fact, this is the customer they prefer because they are more suseptible to the endless cycle that borrowing money with a giant interest rate causes.
A short term loan can be a godsend, but they can easily turn on you. Unless you are completely aware of the risks involved you should stay away from them. Having exhausted all other possibilities such as debt consolidation loans or other low interest loans, borrowing from friends, selling extra valuables, or living for a spell without your cellphone, only then should you consider the short term loans.
