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According to Lisa Servon and Joe Coleman, payday lenders fill a need for immediate access to cash for individuals who may not have sufficient savings or access to traditional banking services. They provide quick loans to help cover urgent expenses, such as medical bills, car repairs, or unexpected costs, often for people living paycheck to paycheck.
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The relationship between a person’s need for payday lending and their income volatility is significant. Individuals with unstable or fluctuating incomes may struggle to manage their finances effectively, leading to situations where they need quick cash solutions. This need arises because income volatility can create gaps in cash flow, making it difficult to cover essential expenses without borrowing. This situation is often exacerbated for those in low-wage jobs or gig economies, where earnings can vary widely from month to month. Consequently, the reliance on payday lenders increases as these individuals attempt to navigate financial unpredictability.
1. According to Lisa Servon and Joe Coleman, what need are payday lenders filling?
2. What is the relationship between a person’s need for payday lending and their income volatility? Why do you think this is?
1 answer