Fewer Colorado Consumers Take out More in Payday Loans

By: Javi Calderon
Fewer Colorado Consumers Take out More in Payday Loans

In 2009 the number of Colorado consumers who took out cash advance loans dropped nearly 8 percent. However, the number of total loans and the amount of money leant out grew according to a study by the Colorado Attorney General’s Office. Obviously this can be attributed to repeat borrowers.

An increase in unemployment can be pinpointed as the cause for the drop in borrowers. In Colorado a person can not qualify for a payday loan without a recent paycheck.

Not only has the number of customers decreased, but the number of lenders has decreased as well. The number of payday loan stores in Colorado has dropped from 505 to 411 by the end of the year. Many payday loan lenders where forced to shut their doors due to new legislation restricting interest rates and limits on fees.

Before loan terms would range from two weeks to a month, now Colorado lenders must offer six month loans, and the loan can be worth no more than $500. Every roll over used to come with a $75 charge. Now lenders can only charge a $75 fee once, and they can only charge a total of % 45 interest on entire loan.

Under these limits, if a loan of $500 is open for the whole six months the most the borrower would pay is $292. Of course, the sooner they pay the loan back the less they will pay in interest and fees.

Local industry officials also point out that the reason for borrowing has also shifted. Before, many loans were taken out to fund vacations, trips and new toys. Today borrowers are taking out payday advance loans to pay for bills.

This is an important shift to point out because while most states, like Montana, are implementing regulation in hopes of shutting down the payday loan industry, Colorado has obviously seem the merit and the necessity of providing consumer loans.

Payday advance loans have found a niche as a short-term solution to money problems for the low income community. People with low income or bad credit, or people simply in need of a small amount of money, have needs that banks simply can’t or won’t meet. While it’s easy for lawyers and politicians to write payday loans off as being scams to trap people, they will never be in the position of needing money and not being able to get it.

As a country, and as individual states, we need to make sure we have financial products that fit the needs of all members of our society