Why do payday loans exist?
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: Feb 15, 2012
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
Payday loans are the most despised version of financing in the world of lending and borrowing. When there is this intense and publicized hatred for these loans, we have to ask ourselves why they even exist, or are allowed to continue to exist.
The most obvious answer is because there is a demand for this type of financing. For all of the bad stories we hear in the news media, there are countless others that would be considered good and helpful. But those don’t make for good or interesting reads, so they’re rarely publicized.
Another possible answer—though one that would likely receive much criticism—is that payday loans are necessary.
As Paul Crayston, a media officer at Money Advice Trust, explains “No one takes a payday loan out of choice, they take it because they’re forced to or are unaware of other alternatives,” reported Money News.
Payday loans provide short-term cash financing to anybody with a paycheck and a bank account. Credit score doesn’t matter, and financial history—or lack thereof—isn’t considered important to these lenders. As a result, payday cash advances are necessary for those who encounter unexpected bills or expenses, and who cannot get cash from other institutions.
Some argue that without this type of service, the millions of cash-strapped customers who take out payday loans every year would be forced to turn to other means of obtaining money. If these quick, no credit loans were unavailable, then when banks and credit unions refuse to lend money to a borrower, that borrower will be forced to turn to less-than-legal means of obtaining money. More specifically, loan sharks would begin to plague and prey upon our nation’s financially struggling population.
Because, after all, ridding supply doesn’t rid demand.