|Secured credit is safer than payday loans|
Obsession with discretionary spending
Many point to the fact that children who were born in the late 1980s and early 1990s are still living with their parents as being a primary reason for their financial problems. Since they are not on their own, with real expenses to take care of, they have very little idea of how the real world works. For them, money is spent on whatever they want to buy, the foods they want to eat, and the entertainment they want to enjoy. With incomes that do not match up with their fantastic expectations from their life, it can often lead to a lot of debt.
Options for loans are dwindling
Banks are very careful when handing out loans these days. Unless a person has a solid credit history, a high paying job, and/or someone who is going to be a cosigner on their loan, they are not going to give out a loan. This means that generation Y is running out of places where they can go to get more money. Credit cards are an option, but it does not take long for people to max out the cards they manage to get.
With rent prices going up, but most jobs not paying as well as they should, it is clear that there is a debt problem among people aged 18 to 34. These are people who should be setting themselves up for the rest of their lives. They should be saving money, thinking about starting families, and wondering when they will buy their first home. Instead, they have credit card debt, college loans, and other financial issues to deal with. On top of all of this, many are turning to payday loans.
If payday loans are used correctly, they can be a valuable financial instrument. These are short-term loans, ideal for people who need a few extra hundred dollars to pull them through until their next payday. However, far too many people do not use payday loans correctly. Too many are putting themselves in greater financial risk and trouble. They will get a loan without thinking about how they are going to pay it back a mere few weeks later.
As long as millennials are careful, and use these loans only when they have a clear method of paying them back two or three weeks later, there is no harm done. However, individuals who borrow from payday lenders knowing they will be unable to pay the loan back are only digging deeper holes for themselves.