Payday loans can make matters worse

So-called payday loans are often the last solution for people who are in immediate need of money. Cash can be borrowed for a very short amount of time (or till the next pay day, hence the name of this type of loan). The loan rates for this type of personal loan are usually higher than the rate for a regular personal loan.

The payday lenders (also called cash advance companies) make their money from the fact that people who are borrowing money through them can, more often than not, not repay their borrowed sum within the required amount of time (usually two weeks). This results in people taking out more loans to pay of the first loan. In this process people end up paying a very high interest rate for a long period of time. The financial situation gets worse gradually and the personal payday loan has, in the end, only made matters worse.

There is now a lawmaker's proposal to curtail the activities of these payday lenders. To protect clients from ending up in a situation where their debts are accumulating, there is talk of not just a curtailing of these loans, but also a ban on payday lending.

A lending professional has commented that with the proposed new loan legislation for South Carolina, the payday loan might as well be banned altogether. Payday loans and payday companies have already been largely barred in the States of North Carolina and Georgia.

The State of Virginia is now also considering adapting its legislation to match Clemmons' bill. Instead of borrowing more money the legislators say that it is more important that people in need of more money should seek financial help and assistance through debt management agencies.