Approximately three out of ten Americans turn to bad credit loans for more than just emergencies. Based on a report, expensive short-term loans are being used to cover utility bills like energy, rent and water as well as tax bills. This is a rising trend that has gotten financial analysts worried.
The report suggests that over a million Americans use their credit cards, overdraft and even online bad credit loans just to pay for things that are supposed to be staples in their monthly expenses. On the average, each person borrows between $10 and $450 per person just to cover the cost of their household expenses.
The Debt Counseling Service expresses concern on this new trend. The Agency says that the number of people seeking debt counseling has ballooned over the last years. Apparently, people see the need to borrow just to keep pace with all rising costs in utility and also to keep a roof over their heads. The Debt Counseling Service worries where all the short-term borrowing could lead a consumer given their accessibility and likelihood for abuse.
The problem does not lie on how bad credit loans companies do business, says the Debt Counseling Service. The all-shortcut processes help those in emergency gain access to the cash that they need in order to satisfy their dental or medical needs. However, with so many people struggling these days, this just shows how open the services of online loan companies are to interpretations.
Who Use Bad credit loans More?
Studies show that men are more likely to use bad credit loans compared to women. This is understandable granted that our society dictates that men should provide for their families. What is surprising, though, is that the young are even more likely to borrow money than the adult men. To prove that, statistics claim that 38% of short-term loan users fall between the ages of 18 to 34 while 30% are aged 35 to 54. The remaining 17% are loan consumers who are over 55 years old.
What Actions Did The Government Do?
In order to regulate online bad credit loans, especially in terms of the interest rate and fees applied, states have come up with their own rules regarding the operation of short-term loans. Accreditation remains to be the primary step done to ensure that all lenders are given due attention.
Further, the short term loan industry has even created its own Code of Ethics to deliver better consumer protection, more help for consumers that get into financial distress and increased transparency.