Payday loans Essay Example | Topics and Well Written Essays - 250 words

Payday loans - Essay Example Even more is the issue of employment. As the nation struggles with high unemployment rate, the payday loans industry has come to be one industry that is absorbing a lot of unemployed citizens. The economic relation in determining the interest rates on loans paid to low income earners and middle and high income earners emanates from the common principle of guarantee and surety. It is logical to assume that the middle and high income earners would easily pay off their loans. To the lender, it is the low income earner who would face problems paying off the loans. Experience has showed that some low income earners stop paying off their loan half way through (Gardener, 2008). This means that if higher interest rates were changed, the lender may not have much to loss because of the stoppage because as at the time of the stoppage, they might have made enough accumulated sum for the original amount taken. Banks seem to be refusing to enter the venture because of the risk involved. It would be noted that the loans are mostly patronized by low income earners who cannot guarantee payment. The banks therefore do not want to risk having their monies being made away with especially as the economic meltdown seem not to have been totally recovered from. In the absence of payday loans, those who benefit from it would simply have had to cut down on their expenditure in order to make their earnings sufficient for