Online Payday Loans

How can the purveyors of online payday loans justify the premium rates for their services? While consumer advocates may point out that the vast majority of people who take out online payday loans are low income and high-risk individuals, advocates for the industry offer a number of thoughtful defenses.

On one hand, online payday loans provide a source of funding for citizens who otherwise wouldn't be able to get cash in a pinch. The mere fact that people with terrible credit and bounced checks in their histories can create some kind of financing helps people avoid damaging financial fallout.

For instance, online payday loans can be used to pay an angry landlord and thus avoid eviction. They may also be used to extract a car from an impound lot and thus enable an individual to drive to work to earn enough money to scrap together life financing. Finally, online payday loans can help individuals avoid debts that can accrue interest at an even faster rate. For instance, funds can be funneled to an extremely high interest credit card to prevent run away APR rates from causing protracted financial headaches.

It's also possible to find closely regulated, highly esteemed websites for online payday loans, whereas it can be difficult to search for A-plus short-term lenders within your neighborhood or even metro area. Besides, many people searching for cash advances don't have access to easy transportation. The time and travel fees associated with shuttling back and forth to a remote loan office may add an inconvenience factor and even create an additional “tax” in the form of bus fees or train fees required to make the trip.

Providers of online payday loans also point out that high processing fees and delinquency among borrowers force lenders to charge steep fees. Indeed, studies demonstrate conclusively that the cash advance industry is not a high profit sector, owing to the fact that the cost of processing tiny loans ($100 to $200) can often be equal to the costs of processing much larger loans (on the scale of a home mortgage loan).