Barack Obama

Have you heard of the Federal Trade Commission has issued a "Consumer Alert" with a big headline that says: Payday Loans = Costly Cash. Forms Just as there are many to see the situation, it is with payday loans or cash advance.

In simple terms, a payday loan payment is anticipated in their next paycheck. There are many companies around the country that offer these very small short term loans. The term or length of time you have to pay the money that normally goes from 2 to 4 weeks. The fees or costs of this short-term loan can be between 25 and 50%. And here is where the Federal Trade arrives with his complaint.

The governing body spends too much time acting as if they help consumers. The government has the authority to make changes in the way These loans are offered if they were really interested in helping or protecting consumers. Instead however, say that the APR or annual percentage rate of loans Small is in the hundreds of percent on the right, but that's not the whole story.

Everyone knows that when you purchase a product in a small package costs more. In larger containers or more usually costs less. Consider now how this fact with regard to payday loans.

Consider these facts:

1. A payday loan is usually $ 200 – $ 500. In the lending business, this is a very small loan amount. It is reasonable, then, that the cost of this service would be more expensive than a larger loan.

2. A payday loan is therefore service as a loan. Although a bank or credit union can offer a lower interest rate, how many of them would be willing or prepared to front a couple hundred bucks to tell your next paycheck?

There also is no way a bank or credit union would able to process your loan in just a couple of hours service payday loan every day.

3. Consider loans payday in their costs of other purchases.

When you buy something at the store, the price can be broken into two parts. The first part is the actual cost of the product. The second part is called a profit margin. A profit margin is simply the difference between the actual cost of the product and what they pay as a customer. The profit margin for the construction, employees and other operating expenses of the business, including profit.

When dining out with the cost of food is a very small part of the overall total is cobra. Furniture, jewelry and many other retail stores have profit margins that are much larger than a payday loan is typical recovery time.

Jewelry and many other retail stores have profit margins, which is the amount of money on the product's cost, which are much higher that at the time of payday loan.

So when you look at a payday loan as a service, and the fact that when the loan is paid on time, and real interest rates are actually quite reasonable. I do not disagree with the FTC to keep short-term payday loans advance active and continue to roll over can be very costly.

The use of a payday loan advance in an emergency situation and for a short period time really can be a lifesaver.

CME Federal Credit Union