It might seem like a good idea when you're a bit short on cash, but payday loans are a trap. Payday lenders target low and moderate-income people. They advertise payday loans as a quick, easy way to help a person make it until the next payday.
In reality, payday loans begin cycle of chronic indebtedness. According to the Center for Responsible Lending, the average borrower ends up indebted for more than six months with an average of nine payday loan transactions at annual interest rates exceeding 400%.
The rates, terms, and reality of payday loans are sickening for everyone, but especially for rural residents. Small towns have a high percentage of self-employed rural people. Entrepreneurs need access to capital, so it's important for consumers to protect their financial health. A poor credit history will limit the number of financial options open to entrepreneurs. Anything that prevents current entrepreneurs from growing or budding dreamers from opening a business harms rural communities, where entrepreneurs are a major economic force. They are often strong community leaders too.
Some more of the gross realities of the payday loan industry are outlined below:
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