With the country officially in a recession, many people are finding it difficult to pay their bills and purchase every day necessities such as groceries, gas and additional required household items. Requesting a payday loan has especially increased due to job losses, when a double income family suddenly becomes single income.
According to NewsOK.com The State of Oklahoma has seen more than one million loan transactions made from July 2007 to June 2008 and the numbers continue to rise. Payday loans are high interest; however seem to be the only answer for low income families who have no other financial means. Instead of losing their homes, they would rather pay extra to pay important bills, such as the mortgage and credit card payments.
The trouble with taking out a payday loan is the interest is so high, up to 512 per cent annually in Oklahoma, that many people have trouble digging themselves out of the debt they incur, therefore forcing them to continue the cycle of taking out a payday loan once or more a month.
According to the Operations Manager for Federal Cash Advance, Oklahoma approves such high interest rates to ‘defer’ people from using the loan on a regular basis and only borrowing money for emergencies. Apparently the state law requires lenders to warn customers that the loan is not for long term and should not be used as a means of regular income. The former Administrator for Oklahoma Department for Consumer Credit, Donald Hardin, believes the high interest and the payday loan market only exploits low income families who have no where else to turn.
Payday loans offer higher rates and many don’t intend to lower their rates, especially in light of the economical times. If people pay their debts off, payday lenders could lose business and therefore go under. While such states as Ohio and Arkansas have passed laws to cut down their rates, Oklahoma has yet to follow suit.
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