According to Lisa Servon and Joe Coleman, what need are payday lenders filling?

According to Lisa Servon and Joe Coleman, What need are Payday Lenders Filling?

The correct answer is People often need access to credit to handle an emergency or pay for day-to-day expenses, and if you don't have a credit card there's no real way to get a small, short-term loan at a fair rate

According to Lisa Servon and Joe Coleman, payday lenders are filling the need for people who require access to credit to address emergencies or cover everyday expenses. If individuals do not have a credit card, there isn't a readily available option for obtaining a small, short-term loan at a fair interest rate. Payday lenders, in their view, step in to provide this financial service. They argue that traditional banking institutions may not always offer such options due to factors like strict regulations or credit requirements.

What are Payday lenders?

Payday lenders are financial institutions or businesses that offer short-term, small-dollar loans to individuals, typically with the requirement that the loan be repaid on the borrower's next payday. These loans are often used by people facing immediate financial needs or emergencies.

The loans provided by payday lenders are usually characterized by high interest rates and fees, which can make them expensive for borrowers. Critics argue that the high costs associated with payday loans can lead to cycles of debt, where borrowers find it difficult to repay the loan in full by their next payday, leading them to take out another loan to cover the previous one.

Due to these concerns, regulations around payday lending vary widely by country and even within regions of a country. Some places have implemented strict rules or even outright bans on payday lending to protect consumers from potential predatory practices. Others have established regulations to govern the industry and ensure that loans are offered in a fair and transparent manner.