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Maine residents benefiting from short term lending

Mar 27, 2018 Quinn Thomas

For those living paycheck to paycheck, exploiting opportunities to capitalize on alternative credit seems like a viable option. Sometimes, unforeseen expenses occur that can set a household behind, tarnishing its residents' financial reputation.

Whether a car breaks down, a water heater bursts, a septic tank cracks or some other unanticipated accident transpires, people need to fix these solutions fast. A broken automobile could be a person's only means of getting to work.

A viable solution
It's a catch-22 situation. The only way a person can pay for vehicle repairs is by going to work, but the only manner of getting to the office or jobsite is by driving there. Short term lending offers solace to those who find themselves in such a position.

According to the Portland Press Herald, many people residing in the state of Maine have relied on quick, temporary loans to get themselves out of financial binds similar to the one mentioned above. The amount of households turning to short term lenders is rising steadily, currently standing at 7.5 percent.

Low-income homes are prevalent
The news source acknowledged the findings of Gregory Mills, a member of Washington, D.C.-based think tank Urban Institute, who surmised that Maine's considerably high usage of alternative credit stems from a high working class and low-income population. The majority of residents make anywhere between $15,000 to $30,000 a year.

Although short term lenders have been criticized for exercising high interest rates, others have blamed financial illiteracy as the primary problem. Main Center for Economic Policy Executive Director Garrett Martin noted that some people don't know how to properly track monetary transactions.

"This speaks to a lack of understanding of debt and the ability to manage debt," said Martin, as quoted by the news source.

Other alternative credit forms
Short term lenders aren't the only organizations those in need could turn to. Bankrate outlined a unique way in which those experiencing tough financial times can get back on their feet.

Credit unions offer members to borrow up to $500 per month and repay any loans on a monthly basis. Each allowance is synchronized with a SALO account that deducts 5 percent of the appropriated amount and puts the funds into a statement holding money that can be accessed during emergencies.

By reserving cash for critical uses, people can be prepared for any accidents that may occur. Short term lending and other forms of alternative credit offer people a chance to finance payments in a timely manner.