Aug 16, 2013 Quinn Thomas
Short term lending has recently come under fire, as the New York Department of Financial Services sent cease-and-desist orders to online lenders preventing them from offering short term, high-rate loans in the Empire State, according to Reuters.
While some of the criticism may be justified, short term lending is beneficial to millions of Americans. With many consumers living paycheck to paycheck, they often can't keep up with their finances each month, so when an unexpected expense arises they can find themselves in a financial bind.
Instead of paying for a surprise doctor's bill or car repair with the money that was going to go toward rent or a credit card, consumers are able to turn to short term lenders for assistance, American Banker noted. Essentially, some Americans are able to avoid being evicted by utilizing this type of financing.
One of the biggest criticisms of short term lending is that it comes with high interest rates and fees, but with most terms being just a couple of weeks, the source noted that the cost of these loans is less than the fee on a bounced check or late mortgage payment.