Question

In: Finance

Payday Loans.  As you saw, the interest rates on these loans can be extremely high and are...

Payday Loans.  As you saw, the interest rates on these loans can be extremely high and are even called predatory by some. Do you think such high interest loans are ethical? Why or why not?

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Expert Solution

Payday Loans

A payday loan is a type of short term borrowing where a lender extends High interest credit based on borrower's income and credit profile. These loans are also sometimes referred to as " cash advances". Payday advance loans rely on the consumer having previous payroll and employment records. thus, a payday loan's principal is typically a portion of a borrower's next paycheck.

They charge high level of interest from the borrowers and may be considered predatory loans because of their reputation of Extremely high interest and hidden provisions that charge borrowers added fees.

For many people , these payday loans are a source of emergency income to cover unexpected expenses as you can apply for these loans online, and they are easiest and quickest ways of obtaining cash.

In my opinion, Payday loans charging high interest rates is justified as the Payday companies have make arrangements of quick cash to the borrower. Even the amount of payday loans is not so high and the tenure of borrowing is also for a short term only, thus to make short term small loans available to the borrowers they charge high interest rates which is not wrong, as it fulfills the urgent requirement of the borrower.


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