Payday loans are based on the honor system. Their entire business model relies upon the assumption that the borrower will be honorable enough to keep coming back month after month. It’s a challenge to remain honorable based on the fact that the sole reason you went there in the first place is that you were short on cash. It’s a miracle that payday loans have lasted this long.
It sounds crazy when you actually think about it but in reality, the majority of people have every intention of paying back the loan. Borrowers generally repay loans for the first two to three months until things inevitably get out of hand and they start looking for a way out.
Something always comes up…It starts with a late payment here and there and then ultimately a flat out default and refusal to pay. I know because I’ve been there way too many times. Most people don’t take out a loan with the sole intention of defaulting on it. The majority of us are just not wired that way…but “shit happens.”
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