Today’s youth
March 16, 2010 | South Carolina, industry, positive media coverage | Comments (1)This young man is wise beyond his years:
Now this is where interest comes in to play with regards to loans. The lender will be deprived of its money for whatever time agreed to in the loan contract. The lender will face opportunity costs by not investing that amount of money in other fields.
Now, thanks to the efforts of Austrian economists and their predecessors, the average person understands the importance of interest in loan making. There still remain many people like Warren Bolton who believe that payday lending is a never-ending spiral of debt that needs to be abolished by the government. Advocates fail to realize that they are actually hurting consumers.
Why are consumers turning to payday loans when they charge higher interest rates than a normal bank charges? Because they are marginal borrowers who take small loans out in an emergency but have a poor credit history. The loans are too risky for the normal banks, but payday lenders are willing to lend them money for a higher interest rate in order to make up for the risk.
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“The loans are too risky for the normal banks, but payday lenders are willing to lend them money for a higher interest rate in order to make up for the risk.”
The answer really is that simple.
This is business, and although some regulation may be viewed as necessary, we still need the ability to meet our bottom-line just as any business.
Funny thing is, I remember a similar situation with video rental late fees. A class action suit was won against a large rental chain (I don’t remember which) which set a new standard for late fees THAT WAS FAIR FOR EVERYONE!! Video stores could no longer charge MORE than the original charge for late fees. For example a 1 week rental at $2 used to charge maybe $1 per late day…. Now, it in effect “re-rents” the video to you for another week for the original $2 charge.
I envision a day in which our industry can shed it’s image as “predatory lenders” and due to fair and responsible regulation, we can exist to offer our services to those who choose to use it.
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