The Loch Ness Monster and the cash advance debt trap cannot be proven

There has never been conclusive proof that there is a payday advance debt trap. Like numerous social issues, the truth is a lot more complex than many would like to admit. There are individuals who borrow cash from a payday lender multiple times per year, however that does not prove anything besides multiple loans were taken out over a year. Within the payday lending industry, individuals who take out a new loan to pay down an old one is called a rollover. It hasn’t been proven that chronic borrowers are doing that.

The debt trap myth

There is no proof that payday loans end up trapping people into an endless cycle of debt. There had been a study done in 2005 though. This showed that payday borrowers typically borrowed a couple of times a year. One study found that 29.6 percent of payday borrowers surveyed had 14 or more loans within the previous calendar year and 9.9 percent took out two or fewer, however 28.1 percent had no renewals or rollovers. However, no study has ever ascertained why chronic borrowers, less than half of all cash advance store customers, borrow money with such frequency.

Loan provider of last measure

Cash advance providers are only there for one reason. This is because nobody else would take a chance on these individuals as they tried to get loans. A credit rating is useless to a payday lender. All the loan provider wants to know is if the borrower can repay or not. The reason why people go to payday loan providers is that they have nowhere else to turn to. A study had been done in 2009 on payday advance demand. It showed that 91.6 percent of individuals get credit from multiple sources. Jonathan Zinman did a survey of payday borrowers. 70 percent had no other place to borrow from, or didn’t know of an additional place.

Credit is a risky thing

There are the customers that do a lot of borrowing of payday advances. They are everywhere. Charge cards and mortgages are debt traps too then. Owning a home outright probably will not happen for many people. Really few individuals live within the same place long enough to do so. Social crusaders explain the money lent with credit cards and banks are debt traps also. That logic does not even make sense. It is really wrong. You can read more in the Pay day Facts and Statistics record on Personal Cash Store.