Jetski Loans Australia :: Articles
SHARE

Share this article with your friends!

Why Payday Lending Enhances Consumer Welfare

Why Payday Lending Enhances Consumer Welfare

Today, We’ll defy the critics and demonstrate why consumer welfare is enhanced within a competitive payday-lending environment.

Critics argue that excessive payday lending charges hurt vulnerable households with increased household debt, delinquency and bankruptcy while reducing consumer spending in the economy.

Let’s take a closer look at why this ignores fundamental economic and commercial principles.

In January 2007, the Federal Reserve Bank of New York published ‘Defining and Detecting Predatory Lending.’

Within the paper, Donald Morgan cites empirical research in the more mature American market to show that people living in states with unrestricted payday lending have more ability to overcome financial difficulty, maintain consumption and repay debts.

Maintaining and Smoothing Out Consumption with Credit
Debt Stressed?
If you're struggling to pay your debts as well as covering living expenses, we are here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

If the ability to consume is reduced, households will demand credit to reduce fluctuations in their living standards and to maintain consumption.

However, households without credit are all alone or they must seek underground credit providers.

Interestingly, if payday lenders raise household welfare by relaxing credit constraints, anti-payday lending legislation may reduce welfare.

Ability to Manage Other Debts and Repayments

Morgan’s findings express the reality very well indeed - “Our findings seem mostly inconsistent with the hypothesis that payday lenders prey on, i.e., lower the welfare of, households with uncertain income or households with less education.

Those types of households who happen to live in states that allow unlimited payday loans are less likely to report being turned down for credit, but are not more likely, by and large, to report higher debt levels, contrary to the over borrowing prediction of our model.

Nor are such households more likely to have missed a debt payment in the previous year.

On the contrary, households with uncertain income who live in states with unlimited payday loans are less likely to have missed a debt payment over the previous year” (Morgan, p. 3, 2007).

“Delinquency rates were not higher for prey surveyed in 2001, even those living in states with higher or unlimited payday limits.

On the contrary, risky households (with uncertain income) surveyed in 2001 were nine percent less likely to have missed a payment if their state allowed unlimited payday lending” (Morgan, p.18, 2007).

There is no evidence from our experience that payday lending increases bankruptcy.

Credit has been very easy to access in Australia during the competitive, low interest rate environment in recent years.

In the few instances where clients have gone bankrupt, larger sums from multiple creditors were primarily responsible. People don’t go bankrupt over a few hundred dollars or even a couple of thousand.

Borrowing Flexibility

Payday loans allow consumers to access only what they need without committing to an unnecessarily large amount over a long period.

Many clients have excellent credit reports and can access mainstream finance. However, they prefer our style of credit to manage their finances.

Unlike credit cards or larger personal loans, the client enters the contract, meets their objective and promptly exits the contract. 

In sums, thousands of Australians are reducing detrimental outcomes for themselves by taking advantage of payday loan credit offered through Financial Services Online.

Share this article:

Boat Loan Specialists
We provide direct access to the best Boat Loan rates and options in Australia through a national panel of specialist marine finance brokers. Simply complete our quick & easy Boat Loan quote enquiry form to see if you qualify ... and to gain access to the best Boat Loan offers from our broker panel.


Finance Articles

Simple Tips On Getting Your Loan Simple Tips On Getting Your Loan
So, you want to get a loan? Here are some simple tips that might help you make more informed decisions about the type of loan you buy, and from whom. - read more
Credit Cards: Identity Theft and Credit Protection Credit Cards: Identity Theft and Credit Protection
Credit card fraud and identity theft have become widespread not only on the Internet but offline as well. Learn how to avoid these risks and protect your identity as well as your finances or credit line. - read more
Why did my Credit Score drop - and how can I fix it? Why did my Credit Score drop - and how can I fix it?
Your Credit Rating (or Credit Score) plays a very important role in determining your eligibility to get a loan. Here we look at the reasons why your credit score may drop and some handy tips to avoid this problem. - read more
Car Leasing Car Leasing
Leasing is an often misunderstood car financing option so, in response to subscriber feedback, we've included this article to help give you a better understanding of what it is and how it works. - read more
Five Worst Credit Card Mistakes Five Worst Credit Card Mistakes
Credit cards can be an excellent way to manage your finances ... they can even be an investment tool. However your credit card can quickly become your enemy if not used correctly. Here are five of the worst mistakes most credit card holders make. If you can avoid these mistakes, you will benefit greatly. - read more
How to freeze the Plastic Debt Dragon in Your Wallet How to freeze the Plastic Debt Dragon in Your Wallet
Are you scared to open your wallet knowing there is a fire snorting dragon lurking in there? You don't need to be afraid of your credit card, you can make it your friend. Here is a plan to choke the dragon and replace it with a friendly furry critter so you can start creating wealth in your life. - read more

Finance News

Interest rates up another 50 basis points with more hikes to come Interest rates up another 50 basis points with more hikes to come
03 Aug 2022: .

As expected, the Reserve Bank of Australia (RBA) raised interest rates by another 50 basis points this month. The fourth rate hike in as many months, today’s decision takes the cash rate from an emergency low of 0.1% to 1.85%. - read more
Business loans on the rise while mortgage growth remains flat Business loans on the rise while mortgage growth remains flat
02 Jun 2022: .

Australian business loans growth accelerated in April as mortgage growth stayed consistent, with major banks growing at less than the system average according to latest RBA data. - read more
Homebuyers up in the air despite new  government home loan support Homebuyers up in the air despite new government home loan support
29 May 2022: .

The government’s promise of an equity contribution will help the most disadvantaged Australians to get a home loan, but they still won't be able to afford one. - read more
RBA lifts official interest rate RBA lifts official interest rate
03 May 2022: .financialservicesonline.com.au

The Reserve Bank of Australia lifted the official cash rate by 25 basis points at its meeting Today. - read more

APPLY NOW
 jetski loan brokers

Apply here now for quick, easy access to quotes and product comparisons from a selection of Australia`s leading and best known Boat Loans specialists.



Knowledgebase
Consumer Credit Code:
An act of Parliament that governs the relationship that exists between borrowers and lenders.


Quick Links: | Jetski Loan Rates | Jetski Loan Brokers | Jetski Loan Calculators | Jetski Loan Quote