Payday loans in Illinois are a new innovation. Consumers can apply online for a loan or via fax in certain cases, depending on the documentation required. The American context is dominated by families of Hispanic or black descent, recent immigrants, and/or those with low education. An industry expert wrote a letter to the editor arguing that payday loans have proven to be more beneficial for consumers than other studies. In 2013, the Insight Center, an advocacy group for consumers, reported that payday lending costs Americans $774 million per year. The traditional retail model allows borrowers to visit a payday lender and obtain a small cash loan. Payment is due in full at the borrower’s next paycheck. The borrower sends a postdated cheque to the lender detailing the total amount of the loan and fees.
The borrower must write a postdated check to the lender in the full amount of the loan plus any fees. If the account is not sufficient, the bank may charge a bounced check fee. Additional fees or an increase in interest rates or both may be incurred by the borrower. External costs can be increased to include businesses not patronized by the cash-strapped customer, and the family members who have fewer resources than before the loan. TMX Finance also offers a Georgia second-lien automobile product under the EquityAuto Loan brand. Operations are conducted in 122 TitleMax stores and through 4 standalone shops. The Center for Financial Services Innovation conducted a 2012 study.
The Center for Financial Services Innovation conducted a study in 2012. It found that 69% of payday loan borrowers borrowed money for recurring expenses. 16% were for unexpected emergencies. 8% were for special purchases and 2% for other expenses. A study published in The Journal of Consumer Affairs showed that people with low incomes who live in states that allow three or more rollovers are more likely to use pawnshops and payday lenders to supplement their income. The most directly affected are those who have low-interest debts from the same borrower. These loans are less likely to be paid down since the income used to pay the fee for the payday loan is limited. Payday lenders are attractive to investors because of their tendency for low default rates. A payday loan, also known as a salary loan, payday loan, payday loan, cash advance loan, small term loan, payday loan, or payroll loan, is a short-term, unsecured loan that often has high interest rates.