Banks Offering Payday-like Loans: New Regulations and the Economy Slowing Down
Distrust of the traditional financial institutions by the general public and new regulations with the present banking systems, is combined with the economy being on a slow down. The banking sector has been forced to reduce their lending capacity and payday loan offers have become an alternative for people needing money in a hurry.
The banks began seeking for alternative methods to make up for their losses with the new regulations that came into force, related to debit cards and overdraft charges. Short- term loans under the guise of Direct Deposit Loans found their niche in the market, offered by banks and credit unions throughout the States.
Although there is a similarity between direct deposit loans and payday loans, the direct deposit loan differs when the principal sum is deducted from the client’s next direct deposit check, for repayment of the loan.
However, it has been noted that this type of lending leads to clients taking out loans for about six months, to pay back the original amount. The banks state that these types of loans are intended for last resorts only, and do not allow their clients borrow more than half of their monthly income.
These loans types require clients having the facility of direct deposit accounts with a banking institution, and as there are no application processes necessary for direct deposit loans, it is an easy option to quick cash when it is needed.
Those people living from paycheck to pay check often find the need to use this type of loan for emergencies. However, the loss of a half month’s income has the direct implication of leading to an unfortunate mouth-to-mouth existence for several months ahead.
The banks overall, seemingly have a reluctance to reveal the charges they impose on their clients for direct deposit loans.