Payday Loans, Pawnshops Doing Fine in This Economy

My husband and I know a guy that does tech support for a company that does payday loans. Recently, when the economy came up, he said something to this effect: “Payday loans are doing just fine. In fact, the company I do work for is seeing an increase.”

This information, though somewhat disheartening, is not all that surprising. As credit card companies and other lenders tighten their credit requirements and boost their interest rates, many people (and businesses) are turning to fast cash.  Cash that doesn’t require an extensive credit check to get.

While payday loans can provide you with a short-term easing of your cash flow situation, it is important to be wary. Be very wary. If you roll over the loan, the interest rate is extremely high, and you can soon owe more than you originally borrowed. In this way, payday loans can actually be worse than credit cards.

Another thing to take into consideration is the fact that payday loans are considered “lesser” debt. They look worse on your credit report and count more against you for your credit score than many other types of loans.

Pawnshops seeing more business

Payday loans aren’t the only offerings in the area of “quick cash” that are seeing an increase. MSNBC reports that pawnshops are doing brisk business. These are another form of “short-term” loan. You bring in an item for cash, and you are charged an interest rate. If you come in and pay back your loan, you get the item back. If not, the shop keeps the item and sells. Some people are just selling their items to get money, and not worrying about the loan part.

If the economy continues down this path, with increasing job losses and other issues, we’ll probably be seeing more of this kind of lending.

image source: sxc.hu