Payday Loan thing?

[GreyWing]

As much as many will disagree, many in this group are forced to take a payday loan because no one else will give them a break.

I don't get this, who is forcing them and how are they forcing them?

 

[cc976a]

I don't get this, who is forcing them and how are they forcing them?

I assume he means for those struggling and just about making ends meet then facing an unexpected but essential bill....

....or perhaps as Sean says, rate of inflation on goods and services rising far higher than the % rate of salary and finding that true expenses are outweighing income (not counting the luxury items that could be cut back on)

Both of these situations would be prime target for a payday loan, but once in - unless you are really disciplined and sensible (which I'm afraid too large a proportion of society is not) getting out of the cycle is difficult

Going back to Julian's question - afraid there isn't (like almost every other problem) one true answer that will be a catch all for everyone in every circumstance.

 

[Lovekraft]

I don't get this, who is forcing them and how are they forcing them?

From what I can see Sean hasn't said anyone is forcing them, more the circumstances someone might find themselves in which leave them with little else choice and he gave some good reasons for that.

And yes, many people can be and are irresponsible when it comes to important things like managing money, however the payday lenders are basically cashing in on this misery which really doesn't help. I'm not saying it's their fault that someone is irresponsible, but it's not something I would feel comfortable making money from in any way.

 

[GreyWing]

From what I can see Sean hasn't said anyone is forcing them, more the circumstances someone might find themselves in which leave them with little else choice and he gave some good reasons for that.

But not everybody that struggles is forced to a payday loan company.

If we follow the logic train here, If payday loan companies didn't exist, what would those conditions then force people to do?

Let me have first pop at this, I'll answer "cut back and stop spending".

 

[disruptive]

Attributing blame is a tough one to place. To help people avoid this, we need to be teaching financial literacy at school and perhaps encouraging a different way of solving the problem: i.e. saving, waiting, showing patience and perseverance before spending.

Just look at other developed nations and their relationship to credit - UK has some of the worst attitudes to borrowing money (IMHO). Germans are tight and don't like borrowing money and perhaps we could all do with a bit of the old fashioned doing without until you really can afford it.

Granted this is tricky in a celebrity obsessed culture where peoples want's often overrule their capacity to afford it. Education is the way out here, getting people educated on the Macawber Principle:

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

 

[GreyWing]

Attributing blame is a tough one to place. To help people avoid this, we need to be teaching financial literacy at school and perhaps encouraging a different way of solving the problem: i.e. saving, waiting, showing patience and perseverance before spending.

Just look at other developed nations and their relationship to credit - UK has some of the worst attitudes to borrowing money (IMHO). Germans are tight and don't like borrowing money and perhaps we could all do with a bit of the old fashioned doing without until you really can afford it.

Can't put it any better than that mate, spot on as far as I am concerned.

 

[Lovekraft]

But not everybody that struggles is forced to a payday loan company.

If we follow the logic train here, If payday loan companies didn't exist, what would those conditions then force people to do?

Let me have first pop at this, I'll answer "cut back and stop spending".

It's very easy to say that, but sometimes people already have cut back on spending. Like Sean said, many people are on shit wages, but with basic costs of living rapidly inflating all the time while their wages do not. I'd agree that there are some really careless, lazy idiots who are always going to be wreckless, careless borrowers even if it was made clear to them from the start how much interest they will have to pay back. Obviously every case is different and some people could benefit from cutting back from non essential purchases, however taking out a pay day loan isn't going to teach them to do that.

It's those that have been hard working all their lives, have maybe had kids and then a mortgage with bills etc to pay but maybe unexpectedly find themselves on the receiving end of a job cut. And this happens an awful lot and can be really tough to deal with as many of us will no doubt know. Their wider family may be cash strapped too with no spare cash to lend them, feeling desperate it is easy to see why they may turn to payday loans in a desperate last resort attempt to help them and their family. It is easy to lose control when you are at an all time low, pay day lenders make their money from these kinds of situations.

Their are many rich kids out there who have found themselves in a similar position if it hadn't been for a rich parent to bail them out, unfortunately not everyone has such priveledges.

Previous posts about better education on financial issues is a good place to start.

 

[GreyWing]

It's very easy to say that, but sometimes people already have cut back on spending.

But the thing is mate, what happens if there is no such thing as a payday loan? They have to cut back don't they? All payday loans are doing is kicking the can down the road for the examples of people that you and Sean are giving.

Payday Loans can be used to pay for transport until payday for someone who has got a new job and needs to work a month in hand for example. They can be good things is used right and responsibly.

Phone bill going out of £40, direct debit fails and there is a £12 charge, mobile company charges another £12. That is £24 charge when if you borrowed £40 you could have paid back about £4 worth of interest until payday.

Plenty of reasons why payday loans can save money, just the media is all about sinking them. The Daily mail is one, then you look at the article and the ads at the side of the page are from Wonga

 

[GreyWing]

What should they stop spending on Graeme, food? clothes? electricity? water? gas? What about when the cooker breaks or the kids shoes wear out. You're assuming every loan is for a luxury.

No I'm not, I'm saying it isn't a finance company's job to support someone's lifestyle or budget for them. These are two completely different arguments.

 

[Lovekraft]

Could go either way, some might try and find another job / get a second job, sell all their belongings.

Others might turn to stealing or turn to heavy drinking and drugs. The same could be said for someone that's found themselves knee deep in debt from pay day loans.

Sure, i reckon some people can use them temporarily to their advantage, but unfortunately there is a significant percentage of people who don't manage to do so sensibly, the pay day lenders know this and monetise it, they like this as they can then charge late fees etc. You are right, it isn't their responsibility though and they are a business out to make money who don't need to give a shit about their customers, it is just a very ugly business is what I'm saying.

 

[GreyWing]

Sure, i reckon some people can use them temporarily to their advantage, but unfortunately there is a significant percentage of people who don't manage to do so sensibly, the pay day lenders know this and monetise it, they like this as they can then charge late fees etc. You are right, it isn't their responsibility though and they are a business out to make money who don't need to give a shit about their customers, it is just a very ugly business is what I'm saying.

Well maybe their rates are so high because others don't pay the money back. Plenty have gone out of business you know. It's a bit like going into a shop that is suffering from shop lifting, eventually the losses have to be made up by those customers who do pay extra for goods. That's just life unfortunately, same with the Asda and Tesco's. Then on top of that there is also huge amounts of fraud. To do the checks right, we priced it at £4'ish per application.

It is a ugly business at times, you are right there are some ugly lenders and there are also some very ugly borrowers.

 

[Lovekraft]

It is a ugly business at times, you are right there are some ugly lenders and there are also some very ugly borrowers.

Ditto, fair point really.