Are payday loans the answer to recession?

From (6/22/09)

One of the oft-quoted lines from the verse of The Bard is ‘neither a borrower nor a lender be’. While many people will agree to the dictum in principle, the way people are queuing up for payday loans, it appears that everybody is not able to follow it in practice. The simple explanation for this is that a fast cash loan is too often an indispensable lifeline to survival. Except the air that we breathe, nothing in the world is free. You have to pay for water, for electricity, for groceries, clothes, education, that is, practically for everything. To pay for all these survival necessities, you need hard cash, and if a person does not have it, he is forced to opt for a fast cash loan.

The world, especially America, is going through a recession. Unemployment rate is an all time high, and the credit card market is shrinking. So both the sources of income and credit facilities are low. Still, ‘when the going gets tough, the tough get going’. And one of the ways in which the tough survive is by opting to take payday loans. In the current economic situation a payday advance is a boon. Till recently, loans were the most plentiful commodity available in the market. In a far cry from the current day scenario, loans were being offered even to those who did not have a good credit score. This wrong business plan has taken its toll on the banks to the extent that if one or two of them have closed, some others have swallowed their identities through a merging process. Now that credit is hard to come by, and hard cash holds the whip, a fast cash loan is the only oar with which people can row across the waters of emergencies.

Payday loans become the savior of the common man because there is no credit check for making a payday advance. As long as the borrower can give proof of his monthly income and a valid check for the repayment amount, for the date on which his next salary would be credited to his account, the fast cash loan would be his. This is very different from a bank loan, which will require a lengthy background check, and a satisfactory credit history for the loan to be sanctioned. With foreclosures and bad credit records, the prime indicators of economic recession, being the order of the day, bank loans have become a closed avenue for most. Payday loans have become a much-needed alternative in this murky economic quagmire.

Payday loans are not an answer to recession. But a payday advance is definitely a necessity during a recession like the one we are going through now. Human beings have no control over emergencies that make a fast cash loan a necessity. If there is nothing for them to fall back upon during such exigencies, their very existence will be in jeopardy.


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