Payday loan providers and the economy

Will payday loan providers begin popping up on street corners in affluent neighborhoods as the economy goes south?

Will the need for short term cash coupled with the reduction in availability of credit going to force consumers to look to high-interest short term loans that are often accompanied with exorbitant fees?

This remains to be seen. Many people have the impression driving through a neighborhood with high number of pawn shops or payday loan providers is indicative of a high crime rate, dropping property values, high unemployment, and more. Some pawn shop owners are resisiting those generalizations. But, to be fair, pawn shops have historically been associated with crime for a reason. Before electronic background checks it was very difficult for an associate at a pawn shop to determine if they items they were buying were stolen. High crime rates bring a demand for outlets to fence goods.

But payday loan providers aren’t so directly tied to crime rates. So why the demand in poor neighborhoods? There’s a myriad of them. The demographic characteristics of many poor neighborhoods include lack of access to traditional lenders, lack of credit or bad credit, and a lack of understanding of fees and interest rates associated with payday loans as compared with traditional usury outlets.

Will the presence of payday loan stores increase while the economy declines? Will this put more borrowers under water? If the trend occurs it’s likely to occur soon. Unless people begin to look for payday loan providers online.