Loans – No

Free market exists when neither the buyer or seller are not coerced by a third party to make decisions about the goods being bought or sold. In the payday loan business, the third party is desperation. When someone makes the decision to get a payday loan it is usually because they are desperate for money. They need money to pay a utility bill, rent or to finance a car repair. Payday seems so far away and a payday loan seems like a good option. The loan will be just for a couple of weeks and in the beginning, they don’t see it the loan taking more than that time to repay. They don’t have credit cards or savings accounts. They don’t have family to help them, or their families have already helped them in excess. They only option they have is a payday loan. The thing that isn’t taken into account is the exorbitant interest rate charged by payday loan institutions. When one is paying more than a 300% APR, it makes paying the loan in full next to impossible. Some payday loan locations allow you to pay only the interest. If they borrow $500 and are only paying interest, they are paying $150 in fees per month. Those fees on top of regular montly expenses makes their financial situation even more stressed. There are also no laws forbidding people from getting loans from multiple locations. With payday loan opportunities located around every corner, it is tempting to get another payday loan to pay off the original payday loan. Before they know it they are paying hundreds of dollars in fees and find that there is no way out. It is a vicious cycle that will not be ended until the government steps in to regulate what is happening in this industry. Payday loans prey on people already having financial difficulty and does not offer them a solution, but rather, a financial set back. People with the means to pay these loans in full on their paydays are not the people who seek these loans. Desperate people without other options are the ones who take little time to think about the results of their decision. Desperation to keep cars or pay their rent trumps the ability to think clearly about the consequences they may be facing for the rash decision they are making. So, it is clear to me that payday loans are definitely no consistent with the free market. Desperation and poverty are definite third parties in the payday loan industry. These third parties put blinders on the payday loan recipient and they are not able to make an informed decision regarding the loan. They are not able to think in of the long term affects of their decision. They are living paycheck to paycheck and can only think about finances from week to week, not month to month or year to year. Once they get into the payday loan cycle, they have an extremely hard time breaking out.