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Payday lenders can be found nearly everywhere.  They are located in store fronts and strip malls in almost every city in the nation, easily available to the middle class and lower income individuals that make up the majority of the payday lenders customers.  Payday loan lending has become one of the most notorious business practices examined today, with many people calling the lenders predatory and just as many calling them saviors.

Where Are They Located?

Payday lenders are typically located in the lower income areas of a city where poor and lower middle class individuals can easily access their services.  They are found along local bus routes and in areas where people come to obtain services on a regular basis, such as near grocery stores, restaurants, or clothing retailers.  They tend to cluster in areas that are not well served by local banking institutions or where opportunities to obtain short term personal loans are scarce.

Supporters Claim:

Supporters of payday lending claim that the lenders are providing a needed service to an underserved section of the nation.  The individuals that typically obtain payday loans do so because they are unable to obtain short term funding by any other method.  If they did not have the payday lenders available, they would not be able to secure money to pay for emergency situations and unexpected financial issues.  Many also claim that the fees charged by the payday lenders is less than the bounced check or over the limit fees that are charged by the nation’s largest banking institutions.

Opponents Claim:

Many opponents of payday loan lending claim that the loans that are made are predatory, prey on the working class, and trap individuals in a cycle of debt that is very difficult for them to free themselves from.  Loans that are obtained from a payday lender must be paid back to the company within a two week period – the average interval between paychecks for working individuals – along with the interest and fees charged for the transaction.  This generally works out to be 300% and 400% interest for a payday loan versus between 10% and 20% interest for placing the same amount of money on a credit card.

The Biggest Issue
 
The most contentious issue that arises in the payday loan debate is the fact that a large number of the individuals that patronize payday loan lenders end up taking out another loan immediately because they cannot afford to have the entire amount of the loan taken out of a single paycheck.  This leads to a vicious cycle where the amount of fees eventually paid for the loan far surpasses the original amount of the loan.  Because many of these individuals are already living paycheck to paycheck with little disposable income, these swiftly increasing fees can quickly result in financial devastation for the people who take out the loans.