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 Posted: Tue Feb 19, 2008 7:59 am
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| Quote: | February 15, 2008
Another Study Validating Payday Lending
Yet another research study has confirmed that payday loans help consumers. A collaborative project undertaken by researchers from George Mason University and Colby College, as well as an independent economist, has thoroughly investigated the economics of cash advance lending, and determined that these controversial personal loans actually help consumers better handle their finances – not the opposite, as so often is assumed to be true. Assuming that fast cash loans are not being over-used by financially vulnerable consumers, the study found, payday loans have tremendously improved consumers’ ability to cope with financial emergencies.
Conducting the payday loan research study were Professors Bart J. Wilson of GMU, and David W. Findlay and James W. Meehan Jr. of Colby College. Dr. Charissa P. Wellford, an independent researcher, also contributed to the study. The team discovered that restricting consumers’ access to cash advance personal loans only denied them of a valuable credit option. For consumers struggling with marginal credit, and un-banked or under-banked by traditional lenders, access to cash advance products could well be the only lifeline in the event of financial crisis, the study found.
Data for the investigators’ research came from the novel use of so-called experimental economics. Using a simulated laboratory environment, the researchers carried out a controlled experiment using three hundred eighteen test subjects to determine what effect that payday loans had on consumers’ ability to cope with financial difficulties. The team was keen to discover whether the availability of fast cash loans made financial setbacks easier or more difficult to cope with – or if they has any effect whatsoever.
The answer to that question was impressive. The research team found that access to cash advance personal loan services, assuming all other variables were fixed, increases the average consumer’s “probability of financial survival” by thirty-one percent. In situations where a dilemma like an emergency car repair, doctor’s office visit, or unexpected utility bill threatened an individual’s financial security, the prudent use of a fast cash loan made a marked difference in borrowers’ abilities to cope with and overcome the setback. That fact held true whether it was the case that a borrower could not or would not access traditional credit services like those offered by traditional banks and/or credit unions, or of they had simply failed to sufficiently save for the “rainy days” that often happen in life.
On the other hand, however, Dr. Wilson made the specific comment that over-use of payday loan products showed a diminished beneficial effect over time, which often veered sharply into financial danger. The most useful application of cash advance services occurred when these personal loans were not used too frequently, or concurrently. Increased use of fast cash loans actually tended to hurt consumers’ finances, giving some validity to critics’ charges that payday lending can eventually constitute a debt trap.
The study was novel for its emphasis on empirical data and analysis, two qualities not traditionally associated with payday loan research. By moving cash advance study into the academic sphere, these researchers have managed to produce the “purest” data on fast cash lending that has ever emerged, possibly to date. |
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goudah2424
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Shazzers
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Posted: Tue Feb 19, 2008 9:43 am
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This 'conclusion', on PDL's, is unbelievable! How can PDL's HELP people...charging all of that %? Seems like, when 'you' get a PDL, it takes 'forever' to pay them back.
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sdchargers_63
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Posted: Tue Feb 19, 2008 9:56 am
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I agree with you Shazzers...
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ladybug
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Posted: Tue Feb 19, 2008 10:42 am
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"Novel" use of "experimental" economics? How about coming out into the real world and doing some studies? It's going to take more than a lot of buzzwords to convince me that the PDL's are anything but crooked.
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Pachacutec
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Posted: Tue Feb 19, 2008 11:48 am
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And who paid for this study? Was it the CFSA? I'm sorry, but I have nothing good to say about a PDL.
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kscornell
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Posted: Tue Feb 19, 2008 3:17 pm
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We need to invite these "researchers" to do a real study with people from this community as well as other forums that truly have dealt with payday loans.
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annie340
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Posted: Tue Feb 19, 2008 5:10 pm
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You can make a study show whatever you want it to show for the right amount of money. So that's why I would be interested in finding out who fronted the money for this.
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kscornell
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Posted: Tue Feb 19, 2008 7:23 pm
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That is true kscornell. Studies are often in agreement with whoever pays. That would be interesting. The payday loan people have strong lobbyists. It's conceivable that they've expanded their influence to academia to give their position the appearence of more credibility.
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annie340
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Posted: Tue Feb 19, 2008 8:40 pm
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I know situations can get tough with people, but..if people can possibly refrain from PDL's, that would be a 'good thing'. PDL's are horrible.
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sdchargers_63
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Posted: Tue Feb 19, 2008 11:23 pm
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Sdchargers I agree 100%. The problems that come with taking out these loans are just not worth it. Unless you can pay it back right away, PDL's always cost way more than you really expect to pay. I cringe everytime I think about taking out another. I know people say never say never. The look on my dad's face when I told him and what he said to me when we went to the bank. I don't ever want to be in that position again. Whatever crisis I have, I will find another way.
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annie340
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