04 March 2014
Should States Continue To Increase Loan Regulations
There have been a lot of news out over the past few weeks regarding the loan industry, and in particular the short term loan industry. These loans cover cash advances, short term loans, personal loans, online payday loans, and other forms of credit that have a short time frame for paying back.
Often these loans have higher interest, but that is because they have less payments and a shorter time frame to pay back. This means that the company that is providing the loan can only make a limited amount of money on lending the credit to individuals. Unlike credit cards and other forms of long term loans where the interest may not be as high, but there are more payments and over the course of the loan a person is paying back much more money than they borrowed.
With all of these new laws and regulations, are they truly helping or hurting the people that need or use them. If a person really needs cash today and can't get it from traditional sources, where else will they turn but short term loans. However, some states are moving to ban them or limit the amounts or number of loans that a person can have. This means that if a person is in one of these states and needs money today, they may not be able to get it, which will most likely cause more problems to them versus helping them.
In addition, states are not moving to regulated other forms of credit that can get people caught in what they call the 'cycle of debt'. This is where a person keeps borrowing and never pays back the amount in full. Oddly, this sounds like credit cards. A person who takes out a credit card and runs up a balance to only pay the minimum each month will take a long time to pay back, and they will pay much more than they borrowed. Yet, states don't regulate the amounts of fees, the number of fees, caps on interest, or even when or how they can adjust their interest.