A recent research study supports the sentiments of payday loan lenders. It is the second valid study in recent months that substantiates the arguments put forth by the industry that payday cash advance help consumers overcome financial hurdles. The newest research study is performed by Bart J. Wilson of George Mason University (GMU), David W. Findlay and James W. Meehan Jr. of Colby College (CC), and Charissa P. Wellford, an independent contributing economist. The research investigated the economics of personal loan lending, and the researchers concluded that the fast cash loans in many cases helped consumers manage their finances, not the other way around.
A previous 2007 study by Donald P. Morgan, Research Officer with the Federal Reserve Bank of New York, and Cornell University graduate student Michael R. Strain, “Payday Holiday: How Households Fare after Payday Credit Bans,” also challenged the general notions about cash advance payday loans. The study showed that certain households in states where payday lending was banned were more vocal about debt collectors and credit lenders than states without payday restrictions. The research shores up the views of the payday industry. The industry’s national trade organization, the Community Financial Services Association of America (CFSA) committed to promoting the interests of payday loan lenders has for years vociferously declared that in many cases payday loans are a better option than overdraft fees and credit card advances.
According to lenders, the 2007 and the new study simply validate their stance that personal loans help their customers avoid financial hardships. Both studies confirmed that fast cash loans significantly improved the borrowers’ ability to cope with financial emergencies.
The GMU & CC team discovered that restricting a borrowers’ access to personal loans denied them of a critical credit alternative. The access to fast cash was even more pronounced for consumers with subpar credit, in many instances the cash loan was the only lifeline during financial crisis, in some cases overcoming a setback.
Alternatively, the study also found fast cash loans worked optimally with infrequent use. The increased or continuous use of quick and easy cash loans hurt consumers’ finances. However, the most important findings of the studies are that, if used prudently, payday cash can provide many consumers much needed financial help.
