Does The Short Term Loans Make Sense For Those Outside The Banking System?

(-- removed HTML --) Short Term Loans Make Sense for Those Outside the Banking System (-- removed HTML --)

Many people are forced to use check-cashing stores to cash checks, pay bills and load cash to debit cards because they don’t have bank accounts or choose to function outside the banking system for various reasons. Many are forced to turn to short term loans because they can’t qualify for traditional loans from banks. These people include the poor who can’t afford to maintain a bank account, undocumented aliens who don’t qualify for U.S. bank accounts and people who fear that their money might be attached to satisfy old debts. Lisa Servon of the University of Pennsylvania recently wrote a book studying these trends, which she called

According to an article posted at (-- removed HTML --) (-- removed HTML --) (-- removed HTML --) businessinsider.com (-- removed HTML --) , Servon spent 20 years studying poor communities of the “underbanked” and “unbanked.” Now a University of Pennsylvania professor, Servon concluded that the traditional views of establishment-based experts--that check-cashing services were unwise and more expensive than using banks--were probably mistaken.

The RiteCheck where Savon worked, according to the Business Insider report, charged $1.50 to pay bills, $0.89 to buy a money order and less than 2 percent of the total to cash a check. Even local business owners cash checks of up to $5,000 and pay about $100 to do so. The reason many business owners are willing to pay these fees is because they employ undocumented workers. Those who cash large checks--including business owners and regular consumers--might do so because they owe money to other debtors or want to hide the money from divorced or estranged

In fact, (-- removed HTML --) nbcnews.com (-- removed HTML --) reports that there are more brick-and-mortar payday loan companies in the United States than the combined total of McDonald’s or Starbucks franchises--more than 20,000. Payday lending has grown steadily because it fulfills an important need for poor people, those with bad credit and those who operate outside the banking system.

Many people live paycheck to paycheck, and even one unexpected expense can throw their finances into distress. About 41 percent of consumers cite their top financial goals are to stay current in paying their bills or get caught up on overdue bills. Short term payday loans offer borrowers the ability to get cash quickly even when the borrower doesn’t have a bank account. Many payday lenders now offer consumers short term loans on prepaid debit cards according to (-- removed HTML --) lowincomefinancialhelp.com (-- removed HTML --)