Predatory lending is a very broad concept but can be defined as the practice of lending in a fraudulent and abusive manner. This means that lenders take advantage of people who are in need of finances and have bad credit history and often become the “prey”. Predatory lending practices are usually prevalent among short term lending contracts; however it can also be found in many long term advances given by lenders.

• Payday loans have come under immense criticism for this particular reason as well. Predatory lending is possible in payday loans since the borrower is in dire need of money and has no other sources of taking out a loan. Sometimes the lenders deliberately keep the customer in the dark about the actual interest rates. Some lenders may even charge as much as 100% interest over the period of the loan.
• Payday loans have been criticized by the United States military as being “predatory” in nature. Since the military has many recruits who fall in the lower income group, payday loans can bring with them financial ruin. Many people have slipped into deep debt due to payday loans and therefore the United States military has capped the interest rate that can be charged for military personnel when they avail of the facility of payday loans.
• The main reason for payday loans to be deemed as predatory by many people is that they seem to exploit those who are facing financial hardship. The classic cliché of the rich getting richer and the poor getting poorer is usually true in cases when it comes to payday loans. Payday loans can sometimes trap the borrower in a “debt cycle” in which the interest goes on accruing and can only be relieved if the whole amount is paid back.
• Payday loans are also aggressively marketed especially in the United States to poor unsuspecting or uneducated people. These individuals often have no idea of other sources of getting hold of finances and thus fall prey to predatory lenders. Moreover lower income groups do not enjoy the credit offered through credit cards and other financial instruments due to their dilapidated financial condition.
• It is always advisable to look for other sources for borrowing money if you are in need of quick cash in short term. However it cannot be denied that there are lenders who offer payday loans without any malice and can be beneficial. However the fact remains that payday loans and credit card debt have ruined many people’s finances and lives. It would be financially prudent to read up about such loans and take the advice of a professional or agent before opting for any type of payday loan.

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