The argument in favor of payday lending

A sign for a payday lender.

Payday lending has become common in the U.S., but it's attracted harsh criticism from many. And it's been banned or regulated out of existence in some states. But banning payday lending actually does more harm than good by restricting credit options for households with no other recourse for loans.

Critics object that fees for payday loans, typically $25 per transaction, are excessive. And sure if you expressed that $25 as an annualized interest rate for a two-week $200 loan, the interest rate would be in the triple digits. But the fee is the risk premium the lender charges to provide loans to people who usually have poor credit. And borrowers don't look at the fee as an interest rate any way. They recognize that $25 is much less than bank overdraft charges, late fees and disconnect penalties from utilities.

Critics also allege that payday loans trap borrowers in debt, sometimes taking months to repay and leading to a cascade of fees. While some payday borrowers do take longer to pay off their loan, this criticism confuses cause and effect. Belated repayment is almost always caused by unexpected financial emergencies, like surprise medical bills or car repairs. Borrowers pay additional fees to extend the payday loan until they can pay the balance. Borrowers and the lenders see an extension as the best alternative in those situations.

Let's be clear. Those of us outside the industry who defend payday lending are not apologists for payday lenders or for the choices made by their customers. We are, instead, defending the right of individuals to make voluntary choices in the marketplace given their unique situation. The defenders of payday lending argue that financial resources are more productively employed when they are allocated by the voluntary forces of supply and demand. Critics of payday lending mostly reject market verdicts.

The best way to help cash-constrained households during times of financial emergency is to give them as many choices as possible. You do not help marginal borrowers by laying out their available options and then eliminating by regulation the one they actually choose.

About the author

Tom Lehman is a professor of economics at Indiana Wesleyan University.
Log in to post15 Comments


Nice info.Did you know that a video went popular of over the first weekend of March. Its title, "Wealth Inequality in America," states it all. It lays out, in apparent, obtainable images, that the space between the wealthiest and the poorest Americans is far vaster than many people have even imagined. With a payday loan, you can pay things instead of taking money out of savings.Read more at:https://personalmoneynetwork.com/payday-loans/

I for one am against payday loans because it is very costly and hurts the lower income earners who are forced to use these loans. There really should be a better option out there for people who need the short term loans to make ends meet.
Michelle http://supervisainsurancecan.com

It was a best part that I discovered an alternative to apettite supressants which is considered 100% safer, only because it is being produced within an FDA accepted laboratory which indicates there is a higher | <a href="http://phen375truth.webs.com">phen375 Costumer review</a> | qc. Phen375 has the same results of apettite supressants, but does not offer the toxic adverse reactions.I decided to offer Phen375 a try with a sample purchase of a 90 count, which came with a totally free additional container of 30. I want to reduce at least 25 weight, and so on the day I received my purchase, I also visited the Phen375 web page and downloaded the diet strategy that is given on the site.I do visit the gym at least 3-4 times a day, just to create sure that I am also improving my fat burning capacity, which I know is essential in dropping body fat quick. Although reading the complete list of substances that Phen375 has, I discovered out that it already contains DHEA and L-carnitine, 2 substances that I used to buy separately and costing me some expensive bucks! These two substances are guaranteed to rate up my fat burning capacity and get rid of body fat quick already, which gives me a advantage,After per several weeks time of getting Phen375, I noticed a loss of my craving for food, although I try to eat frequent small foods, like what is recommended on the diet strategy. After about two several weeks of following the diet strategy, regularly exercising and my Phen375 dose for the day, I already missing 14 pounds! That is more than half of my target dropping bodyweight already!A few decades ago a medication called Phentemine became very well-known with dietitians and doctors for its | <a href="http://www.phen375information.com">phen375 buy</a> | dropping bodyweight properties. Only available on prescribed, it was recommended for patients that were suffering from clinical obesity and those whose bodyweight adversely affected or potentially affected their wellness and needed to reduce some undesirable fat. Since this discovery many individuals have wanted to be able to access Phentemine to help them in their dropping bodyweight struggles.As previously stated, Phentemine is only available on prescribed however a complement called Phen375 is available which is able to be purchased over the reverse. Phen375 performs much the same as Phentemine in that it performs to reduce the craving for food, improves the fat burning capacity to get rid of off a larger quantity of calories and contains a fat binder to inhibit the absorption of undesirable body fat in the diet strategy plan.The governing human body of these types of items is the FDA (Food and Drug Administration) and their process is to asses every items safety for human consumption. Phen375 has the FDA certificate of approval. Initially, Phentemine was prescribed for use with clinically obese patients however the term was soon shortened to basically 'Phen' over a decade ago. Then in 1998 two substances called fenfluramine and dexfenfluramine were removed altogether from Phen creating it just pure Phentemine. Phen375 hit the marketplace during 2009 which consists of Apettite supressant and other 100 % organic substances, creating it one of the most well-known wellness items for dropping bodyweight to date.The Phen375 finished item that can be enjoyed these days by anyone wishing to get to grips with dropping bodyweight is created up of several substances which all perform in synergy with each other to maximize secure and efficient dropping bodyweight.The primary ingredients are as follows and have all been accepted by the FDA:-Carnitine - this has the effect of helping to break down undesirable and stubborn body fat that are harbored in one's human body and transporting them away via the | <a href="http://www.healthproductportal.com/2012/08/phen375-reviews.html">phen375 review</a> | bloodstream. L-Carnitine can be purchased on its own as well.Trimethylxanthine - this component acts as diet strategy to help combat urges that can be associated with a nutrient managed diet strategy.Dehydroepiandrosterone - is present to compliment the L-Carnitine's process of breaking down fat reserves.

Weight reduce can be achieved in many ways, often by operating out for hours at the gym, and creating changes in one's living. However, there are individuals who need to come up with some drastic dropping bodyweight alternatives, especially those who are clinically obese and whose lives may be threatened by http://phen375truth.webs.com their uncontrolled undesirable bodyweight. For most individuals who aim to reduce undesirable bodyweight quick, diet pills such as Phen375 is the ideal dropping bodyweight remedy.Phen375 has been in the marketplace since 2009, and has since earned a reputation for its remarkable fat dropping properties. It combines the most potent substances known to get rid of body fat and reduce craving for food, which are all produced under FDA accepted laboratories. This assures the customers of Phen375 of the best and most secure fat reduce tablet that far surpasses the results of similar items in you need to.Phen375 is depending on the dropping bodyweight remedy, apettite supressants, an craving for food controlling substance. During the period 2002 to 2006, apettite supressants was tagged as the miracle fat dropping, which helped a lot of customers reduce their undesirable bodyweight. However, it was soon prohibited in the marketplace due to the many negative adverse reactions experienced by several of its frequent customers.In 2009, RDK holdings came out with a safer alternative, the Phen375, a synthetic fat dropping. Although Phen375 substances are modeled after those discovered in apettite supressants, there are no adverse reactions associated with its ingredients. Soon, as Phen375 (full name - Phentemine375) became well-known among those who need to reduce undesirable bodyweight, many satisfied customers came out with their own recommendations on how this miracle fat dropping has helped them reduce weight quick and keep them off for http://www.phen375information.com excellent.Some individuals have essential legitimate arguments to refuse pills and capsules of any type - as usually by the purpose of uncomfortable swallowing basically because of having healthcare diseases related to mouth and/or throat. Thus, an excellent lot of medications are designed in a liquid variant.These are much less problematic to use and can not get stuck within the mouth, throat or esophagus. Like a complement, there's no doubt that tea of quite a few types has been applied each for pleasure and for medicinal tasks. Tea blends are already enjoyed for centuries, virtually no price of dangerous results like those produced by the caffeine component in coffee.If you've not simple getting or basically wish not to use pills, Green Tea may be a highly efficient complement to aid you materialize your diet plans objectives. In truth, tea-based fat cutting is only part with the a lot of advantages of this drink. Although tea is not generally all that helpful being a diet plans drink, Green Tea is a single with the very few tea types that is suggested for this process. Take a look at the elements in Green Tea: a mix of herbal tea - Puerh, Wuyi Cliff, Oolong and Sencha. These herbal tea have a very unparalleled taste that is pleasant and The advantages of each green and black herbal tea include highly effective antioxidants that prevent the damaging results of "free radicals" in our environment that are recognized to raise aging rates and cause a variety of healthcare troubles. Tea is discovered in a lot of cosmetic and hygiene merchandise and is utilized in frequent medicine for the treatment of stomach troubles and high blood stress.In Asian cultures that have lengthy featured tea drinking for pleasure and ritual ceremonies, experiments indicate that customers of Wuyi and Japanese Oolong herbal tea get rid of fat at a much higher quantity than those http://www.healthproductportal.com/2012/08/phen375-reviews.html who drank only conventional green tea. The "secret" to weight reduce is usually to get rid of far more calories than you take into your human body system.Seaweed merchandise, fish and tea are already the basis for Japanese cooking for about four thousand years; compared with the US, Asian races are healthier and thinner.

I think it's interesting that there are people here who believe that the word "choice" is a bad thing. Somehow, these people believe that other people should not be allowed to have a choice because "it's for their own good". But there's no logic to this practice.

If someone is going to make a mistake, the only way to learn is to make that mistake.

With Payday loans, we have a product that's been around since 1990. If people were so very stupid to use payday loans, then they would use them once, get screwed and never use them again. It is not human nature to repeat mistakes, and those that cost money -- especially for those short on money to begin with -- are certainly never repeated

And yet, people use these loans again and again -- not because they are stupid -- but because they are helped. And they choose these loans over all other forms of short term credit over and over again.

Are we to believe these people are brain-dead? That's what some commenters want us to believe.

The drug use analogy is a false analogy. Drugs are proven to have a terrible effect on people and they are addictive.

Short term credit is proven to help people (and proven, when the choice is removed, to hurt them), and not addictive.

Leave people alone. They can manage their own affairs and do not need busybodies telling them what they can't do.

I examine many of these issue at the only nonpartisan blog on the internet about payday loans. Please come visit.


Markets work best when they are open to new ideas, not when they are shuttered by regulation. There is obviously a huge demand from people who need credit that have the least access to it. I hate to sound so Republican, but the more small loans like these are regulated, the less likely any innovation will occur to serve that demand.

After multiple attempts of getting a small loan our bank was going to charge us outrageous interest whereas cashloancity.com had a small fee on borrowing $400 and we paid it back when we could no problem! I realize that not all cash loan sites are equal but why the scrutiny? Our credit card charged us $40 for being one day late 2 months ago which put us over the limit and they charged us $40 for that too, but that's alright for them to do?

Try to prove me wrong , but I am strongly confident that payday lenders are not the one who drag people into debt. I think that customers are the one who drag themselves into debt. If someone is irresponsible with their finances, it is always easy to blame expensive services. Why do you all ( well a lot for sure) use payday loans if you fail to make payments? Why are you complaining about interest rate after you fail to amke payments in time? You have to read the agreement before you sing anything or submit online. Come one, look in the mirrior and start being honest with yourself.
Alicia from http://ameriloansearch.com/installment-loans/bad-credit-installment-loan... company

'More choices' could also include selling one's services as a hit-man, one's kidney[s], or oneself entire into debt-slavery. Those who want such to be considered permissible are free to move to or build Sealand, Minerva, or Andrew Ryan's Rapture.

The Culture I want to build (dog-whistle to I.M. Banks fans) will at worst not give certain choices sanction by protecting contracts enforcing them, assets gained from from them, or give the enormous benefit of limited liability from those battening from them, and at best make other choices easier. Yes, this is a public imposition of a sort of morality, but so are laws against theft (at least as practised by the non-rich) and murder, and is comparable to them, as opposed to the silly, sex-obsessed morality (really just tribal purity- and female property codes dressed up as morals) that continues to give the notion a bad name.

Every time we say, 'It is not right that such and so be allowed to happen in our great land/county/house,' we vote against the blind worship of the Market, for which everything is permissible and nothing is true. The utilitarian, observation-based, hedonic/anti-suffering, morality approved of by our better Founders is a reasonable and better, and secular foundation.

And even were theory to prove, in an idealised market populated by H. economicus (hat-tip to Willy), that allowing such loans in their lightly-regulated state were in fact more humane by the lights of that good moral system mentioned above, the model is not necessarily stable against the perturbations of the real world...and half of rural India are in thrall to lenders, often losing their land, sometimes prostituting their daughters, and occasionally killing themselves in despair. 'By their fruits....'---and if the fruits of pay-day lending had proved sweet, no-one would have thought to interfere there.


With Generous Support From...