Despite the controversy that many people have about payday loans, they remain essential to the customers who use them. The media has said a lot about such money lenders and how they exploit their customers using to high interest rates and penalties. However, as long as the financial institutions remain below the norm, some people have to use such facilities for some extra cash.
Over the years, the result of economic research shows that payday loans are very helpful especially to people who are not traditionally served by the financial institutions or who have less access to the banks. Getting a short term amount of money for a week or so seems generally helpful to the customers. It reduces not only the economic stress but also enhances emotional stability.
The other benefit of payday loans is that they can reach all people at all economic levels. It does not matter how much one is earning and where he lives. He can have access to these facilities. This means that it requires less security compared to the traditional long-term money borrowing from the bank. Obviously, this makes life easier for many people who are economically unstable.
Previous studies have also shown that those people who use payday loans tend to have more stable economic conditions than their counterparts who do not use them. The explanation to this is not so clear perhaps it may be because they learn to save due to fear of the exaggerated interests associated with such facilities.
Studies by Karlan and Zinman in 2007 showed that families with easy credit access have job stability, reduced hunger and reduced poverty. Their findings suggest that the customers have real benefits from these credit facilities. Expanding them to reach more people is vital because it will improve their general welfare.