From Payday Loans to Installment Loans

In an attempt to stay ahead of legislation’s latest efforts to thwart the payday loan industry and its predatory lending practices, payday loan stores have once again outsmarted the system that has been trying to shut them down for years.

In the past, payday loan companies thrived on taking advantage of people who have fallen on hard times and find themselves living paycheck to paycheck just trying to survive life’s day to day challenges.

In the traditional cat and mouse fashion, a law was passed in an attempt to shut down payday loans forever, but as usual, legislation was a day late and a dollar short. The payday loan companies were tipped off of the forthcoming changes with enough time to plan a counter-attack.

As a result of the pending changes, payday loan companies introduced the casual shift from payday loans to the installment loan. Installment loans allow lenders to offer long term loans at basically the same rates which over time, ends up costing borrowers up to 5X more over the length of the loan.

This is bad news for people who live life on the financial edge because once you get into the installment loan system and spend the initial loan amount, now you are forced to enter into another year-long agreement with another lender the same as people did with payday loans.

The major difference is that there are no more 30 day loans. Installment loans are usually 12-month contracts and although you can pay it in advance, most people will not have the ability to do so. As an experiment, I took out a 12-month installment loan and despite paying it off in only 3 months, the accrued interest was through the roof and I did not find that the juice was worth the squeeze.

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