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Write a 1 page paper on payday loans. Payday Loans Looking from afar, the payday loan business may only be seen as ‘help-in-time’ service that benefits to a large extent, both the lender and the borro
Write a 1 page paper on payday loans. Payday Loans Looking from afar, the payday loan business may only be seen as ‘help-in-time’ service that benefits to a large extent, both the lender and the borrower. There are however several economic implications to the industry and these would best be felt should the industry come to a halt today. First is the issue of taxation. Because the industry is a profit-making one, the government would lose the tax from that sector. Second is standard of living. Clearly, the government and the banks alone cannot improve the lives of the ordinary people and so the absence of the industry would create a huge gap between the rich and the poor. Even more, is the issue of employment. As the nation struggles with the high unemployment rate, the payday loans industry has come to be one industry that is absorbing a lot of unemployed citizens.
The economic relation in determining the interest rates on loans paid to low-income earners and middle and high-income earners emanates from the common principle of guarantee and surety. It is logical to assume that the middle and high-income earners would easily pay off their loans. To the lender, it is the low-income earner who would face problems paying off the loans. Experience has shown that some low-income earners stop paying off their loan halfway through (Gardener, 2008). .
In the absence of payday loans, those who benefit from it would simply have had to cut down on their expenditure in order to make their earnings sufficient for them.
