According to various reports, U.S. consumers are taking out more payday loans and other emergency financing this holiday season.
However, one source discovered that fewer are using the funds for holiday spending.
Though payday lenders and others specializing in bad credit loans are profiting, the reason is not pleasant.
ReallyBadCreditOffers, a lending review Web site, discovered the unfortunate reason that many consumers are seeking payday loans.
Desperation borrowing has reared its ugly head, shrouding the Christmas shopping season with misery for many. This could be an indicator of the financial health of the season, said financing expert Ariel Pryor.
Poor credit history prevents some borrowers from being approved for traditional financing. Instead, they must resort to expensive instant financing for bad credit such as payday loans.
In the past, payday lending has increased between late November and early
January as people borrow cash to pay for holiday gifts. However, immediate bills seem to be taking precedence over spreading the joy this holiday season.
Lending has come under major scrutiny this year from legislators due to consumer complaints regarding predatory practices. State and federal governments are initiating new legislation regarding consumer protection.
This has resulted in caps on loan amounts, interest rates, repayment terms, and number of outstanding loans per borrower. Even income verification procedures have been affected by the new laws.
Consumers who have bad credit often look for no teletrack loans because these do not involve a bank account or credit verification.
The loans can be found online and offer between approximately $100 and $1,000 for two to four weeks. After an employment verification is conducted, the money is wired to the borrower’s bank account, can be used for any purpose, and is repaid with the next paycheck.
