Should the Government Ban Short-Term Payday Loans?

Should the Government Ban Short-Term Payday Loans?

Calendar July 21, 2009 | Posted by admin

There are several reasons why the government shouldn’t ban short-term loans. First of all, there is interference with free capitalism and trade. Secondly, the government now owns big banks, and they do not want the small lenders to take business.

They want to restrict the amount that payday cash advance (short-term) lenders and pawn shops can give to people to about $100. Most people who use payday loans borrow a lot more than that, and they do it frequently. Many will borrow $300 to $400 at a time. The larger banks do not do this type of micro-loan, and if they did, there would be a lot of application and credit hassle to deal with.

Currently, the short-term loan businesses do not extend credit, so there is no credit check. If a person is forced to deal with a bank, there will be credit checks, and many will be denied this convenience. Borrowing from a short-term lender is very convenient, and has saved the day for millions of people who borrow daily. If the government bans these loans, where will all those people turn to? Many have no family or friends with money, and many have bad or no credit histories. There would be no option for them and their needs.

The government shouldn’t ban short-term loans for these reasons. Also, the government would then need more “watchdogs” to “oversee” this area, and only add to the budget deficit they seem so willing to run up for future generations.

This industry already has its own methods for watching their stores. They would go out of business if severely restricted in their business operations by new government bans. There are millions of people working in the short-term lending business who would lose their jobs if this happens.

Anyone who is interested in keeping short-term loans available, should immediately write their government representatives and let them know how they feel about a possible ban on payday loans and pawn shops lending amounts. People are far more likely to become entangled in debt with credit cards than they ever would with payday loans.

Before there were short-term payday loan stores, people had to go to pawn shops and leave behind valuables. Today, the lenders only need your check or ACH form for collateral on your loan. It is a thriving business overall, and that is the only reason the government might be interested.

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