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Studies Reveal Real World Benefits of Payday Loans

It is no secret that there are lots of folks and organizations out there that like to drag the payday lending industry through the mud whenever they get the chance. Things have become so bad for some alternative financial providers that some lenders have been forced to close up shop because of some heavy pressure from government initiatives, like Operation Choke Point. It appears, however, that there is some very real proof that there are indeed benefits to payday loans that some people don’t want other folks to know about. Two new studies on the payday lending industry cast a new, more positive light on the industry as a whole. A Law Professor from Columbia, Ronald Mann, came to some very interesting conclusions in his most recent study. Here’s just a little bit of what Professor Mann’s study revealed about the short term lending industry: The study proved that credit ratings changes for people who default on payday loans are not all that much different from the credit score changes that responsible borrowers have. The decline in credit score in the year that a borrower defaults greatly exaggerates the final effect of the actual loan default. This is because the credit scores for folks who default on their loans typically experience very large increases for more than 24 months after the year that they defaulted on their loans. In other words, the payday loan default is not to blame as the ultimate cause for certain borrowers’ financial problems. This is usually because the borrowers who do not pay their payday loans back usually have dealt with other financial problems in the past that caused their credit scores to decrease. This all goes on to suggest that defaulting on a payday loan plays a very small part in the complete timeline of distress that default borrowers experience. It is hard to bring all of this into line with the improvements that the improvements to borrowers’ financial situations come from the ‘ability to repay’ requirements that are factored into every payday loan that is provided by short term lending companies. In a… Read More

Tips for Home Buyers with Bad Credit

Every prospective home buyer has a few financial concerns to think about prior to shopping around for a new home. It all starts off with getting prequalified for a loan. This step allows lenders to review your financial history and health. After that, borrowers can begin the process of submitting loan applications, so lenders can get a more in depth history of the purchaser’s financial situation. Lenders will almost always offer the best loans and lowest interest rates to home buyers who pose the lowest risk. Credit scores vary from just 300 to 850, with 850 representing the lowest level of risk. Anyone with a credit score lower than 620 may find that it is difficult to qualify for a mortgage. Don’t lose hope, though, as there are some lenders that specialize in providing mortgage loans to people with low credit scores. If you are planning on purchasing a home soon, but worry about your credit score, here are some tips to help you along your way. Get Your Finances Stabilized Prior to Shopping for a New Home It is a good idea to avoid any major financial changes for about two years prior to purchasing a new home. Lenders are apt to be more comfortable with loaning money to borrowers with low credit scores, if those borrowers have a stable income, up to date bill payments and a stable employment situation. Start Saving Money Now for a Big Down Payment The lenders that provide loans to people with bad credit scores assume that these loan seekers will provide large down payments. It is a good idea to have around 20 percent of the purchase price of your home saved up for a down payment. If you can save more, do so, as you may need additional funds for home inspections, loan closing fees and other expenses that pop up when you get around to actually closing on your loan. Pay Down Your Debts and Keep them Paid Down Lenders will often look at your debt to income ratio when they are looking at your loan application. Debt to income… Read More