Payday loans have never been riskier to its consumers. This type of short term loan will eat all the money.
Basically the system was designed to help consumers that have no savings for them to survive on unexpected setbacks till their coming paycheck.
In assumption, the idea of payday loan is borrowing certain amount of money and will be paid back once the borrower gets his or her paycheck. However, most consumers making it a habit for them to do repeated borrowing that can lead to pay more than the value of the money borrowed.
The financial protection organization has been looking for possible ways to curb possible negative impact on this type of product and as result, it leads them to propose rules in order to protect consumers or the borrowers.
One of the notable rules includes a certain requirement from lenders that will verify borrowers’ capability to pay its obligation during the term ends.
In other words the capacity to pay, requiring them for the applied repayable installment plans.
There are reports that points out on the risk it offers for payday loans, however, the recent changes that has been proposed didn’t do any much change, in fact, it may only leave consumers to more exposed lending practices.
The change that has been made by the rules simply lead the payday lenders for them to shift from their traditional type of short term loans to be redesigned becoming an installment type of loans but still the interest and fees charges are similar.
In addition, many lenders operating now already made the required transition. But still, it will be the discretion of the lender for them to determine every borrower if they have the capability to repay its loan applied.
In addition to the recent changes of the rules that is expected to strengthen overall protection of the consumer in the market.
Establishing a clearer policy that will check the ability of every borrower for them to pay the loan and also a rule that will limit loan payments with affordable percentage based on the monthly of the borrower.
Requiring loans with achievable repayment plans
Enabling price limits to low cost providers with small amount of loan in the market.
This recent change creates a clearly defined cap or data for the overall cost of the short-term loan service, and also to the larger one in a competitive loan marketplace driving its cost down.
Like any other situation, no matter how or what type of changes occurs, using short-term type of loans should be avoided.
If you can save, then do so. Even by putting your unexpected expenses on credit card is the less expensive option than getting a payday loan for it.
And if you feel that you are on financial disaster, speaking to a licensed financial counselor can be a great help for you to choose possible option in order to balance your budget and improve your financial status.