Quick Cash Loans – Now Targeting the Rich
Payday loan shops are one business that few people want to see move into the neighborhood. While the businesses defend themselves as simply trying to assist individuals in need, politicians and consumers in general feel differently. The stores have a reputation for locating themselves in blue collar neighborhoods, alongside liquor stores and pawn shops. And they have been accused, correctly or not, of preying upon those who can least afford their services – the poor and enlisted military personnel.
It would make sense that these businesses be located in these neighborhoods, though. Anyone with a decent job, a good paycheck and a bank card or two would know that borrowing money from a quick cash loan store, with interest rates of up to 500% annually, just isn’t a smart thing to do. And with bank cards available, loans can often be had for one twentieth of the price.
The short-term loan business is thriving. And yet, like any business, the short-term lending business is always looking for new ways to generate cash, along with ways to do business with fewer risks. And the answer for this business may have turned up in an unlikely place – more affluent neighborhoods.
The poor generate a lot of sales for these stores, particularly in that they are likely to renew loans, rather than pay them off. A loan with a two weekstime-span can be paid completely or it can be “rolled over” for an aditional two weeks by paying a fee. It is this process that turns a $200 loan into an $800 debt rather quickly as that interest rate of 1% per day continues to pile up. That’s the upside of doing business in poor neighborhoods. The downside is that while the profits are great, the default rates are high. A lot of individuals who borrow cash eventually fail to repay. Initiating collection procedures takes time and money and may not ever result in collecting the payday loan balance. These unpaid debts run into the millions of dollars annually. And that is why the business is seeking the greener pastures of nicer neighborhoods.
In neighborhoods near Denver, several of which have median incomes of $75,000 or more, short-term loan stores are moving in. One would not logically think that individuals earning such incomes need to borrow sums of $500 or less (the state limit), but in fact, they do. Customers from all walks of life occasionally find themselves just a “bit short” and end up in a cash advance loan shop. As research shows that Americans are becoming more delinquent in paying their charge card bills, these businesses should continue to thrive. The business model is the same, although, to match the surroundings, the stores are a bit nicer. The terms are the same, however, with a fee in the neighborhood of $20 for every $100 borrowed, due in fourteen days.
With such stores appearing in neighborhoods all over America, both rich and poor individuals will soon become accustomed to seeing them everywhere. One thing remains the same, however – it is a really expensive way to borrow money.