Question

Do you Budget? Why or why not? what are the benefits of Budgeting?

And

Research the rates for a Payday local lending company. Compare those rates with a bank loan on a mortgage, car or business loan. Is payday lending ethical?

Answer 1

Yes, I do budget. The reason why I budget is to keep a control over my finances and enable me to make optimal financial and spending decisions. The benefits of budgeting are that it helps to organize a person or an entity’s finances and helps to eliminate unnecessary expenses in the long run. As such budget enables a person or an entity to take charge of their finances and allows the individual to adapt in case of any emergencies, medical needs and unexpected expenses. Eventually a clearer vision of a person’s finances is achieved through budgeting.

The rate for a local payday lending company that is accessible to me is around 36% annual percentage rate (APR). This rate is quite high when compared to a car loan which usually carries a rate of 5% to 8% APR.

No, payday lending is not ethical. This is because payday lending seeks to exploit the need of people who are short of financial resources to make maximum profits. Payday loans are provided to those people who least can afford it at very high rates of interest. This makes payday loans to be extractive in nature and the person who takes the loan derives less value from the loan transaction than the company providing the loan.