Why Payday Lending Hurts Economies

Written by David Schmidt. Posted in debt

Economy and Payday LoansThere are a lot of professional economists that spend a lot of time looking at trends and how different things can influence society and a certain culture. For example, when it comes to payday loan debt of the populace, some people have been able to take this data and extrapolate with other data in order to see the effect on the economy. Rather than seeing just the taxes that are paid by payday loan companies and considering it a positive, these economists analyze aspects of the loans with sociologists, anthropologists and many others in order to find out the true cost for the economy.

Unfortunately for payday loan companies, it seems as though the net cost for a lot of the state economies in the southern United States is millions of dollars in the red. That means there are several companies paying a lot of money in taxes, but it still has a negative net effect on the economy as a whole. How is it possible that such a system is occurring?

Payday Loan Costs to Society

One of the major costs that payday loan companies come with is the reduced spending on goods elsewhere. Consumer goods are a large part of the United States economy and domestic consumption is a huge issue that many economists look at. When it comes to things like buying food and groceries and other supplies, payday loans can really kill the consumption. Another key point to this equation is the fact that many of the lower class and urban poor are the ones that spend the most as a proportion of their total income. Many of them spend whatever money they have on consumer items rather than saving like wealthier people do.

Therefore, the people who are so poor and typically spend a lot of money are instead paying millions of dollars cumulatively to the payday loan companies who are cashing in on their debt. For many of the businesses and restaurants in those areas, this is hurting big time. Economists think that by putting a cap on the interest rates that payday loans are allowed to charge, it can have a big impact on the way that people continue their lives.

Hopefully people who are trying to get out of payday loan debt will realize that they can use a payday loan consolidation expert to their advantage. These experts know their way around the industry and may have even worked in it for a while. They can help you to better understand what you need to do in order to get through the tough times that you might be facing.

In general, it is very difficult to calculate the exact cost of the payday loan companies on a society, but it is a good exercise to figure it out and make a difference in the way our modern American culture is running in the future.

If you ever find yourself in need of money during a desperate time, make sure you find out exactly how much interest you will be paying. More importantly, can you afford to pay this loan back quickly?

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