Many Americans have suffered financial hardship this year due to the coronavirus pandemic. This has been made especially stressful as one of the most expensive festivities of the year draws near, with people unable to afford the Christmas comforts that usually carry us out into the new year.
Those in such tricky financial situations may be thinking of taking out a payday loan, however, while this is certainly tempting given the time of year, one startup founder urges consumers not to go down this path, as expensive forms of credit can end you up in more severe financial problems.
Rick Dent, the founder of the online brokerage firm Pheabs, has made the following comments on the matter:
“The holiday season is a busy time for short-term lenders and borrowers who feel the pinch over the holiday season especially when (it comes to) spending,”
“It is better to save ahead of time or be more responsible with your finances, rather than resorting to high-cost or payday loans. These products are convenient because they make the application look simple and the turnaround is fast, with loans funded within 24 hours. But for the average person, this is a very expensive form of borrowing money at around 400 percent interest, and if you struggle to repay, the fees really start to add up.”
Dan Kettle, the founder of US Lender Finger Finance has also commented on borrowing during this time, stating: “This is an interesting time for lending money, because some coronavirus-stricken households might be looking for extra cash, especially during the holidays,”
“But payday loans should really just be used for one-off emergencies such as car repairs or repairing your home, and you should be able to pay them off in just a couple of weeks. They’re not a solution to long-term financial problems.”
In the past, payday lending was only ever available to a few states. However, these loans are slowly entering the mainstream, becoming legal in an increasing amount of states.
There are numerous startups that are now offering quick finance to those who need it, however unlike the controversial high-cost loans, these products are being offered at a lower price, providing a solution to millions of Americans who suffer from the debt spiral – something much needed given the impact 2020 has had on a number of U.S. households.