Are Same Day Loans Feasible for People on Benefits?

Aparna Iyer Oct 30, 2018
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Here we discuss the availability of same day loans for people on benefits, since they find these loans an indispensable source of supplementary income.
The US government provides a number of benefits to deserving people to help improve their quality of life. These benefits include career development assistance, disability assistance, disaster relief, energy assistance, food and nutrition assistance, grants/scholarships/fellowships, and healthcare benefits.
In addition, housing, unemployment benefits, living assistance, loan repayment, medicaid/medicare, social security, tax assistance, and veteran's benefits are also provided to the people.
Nowadays, one comes across a number of advertisements that make it seem as though, same day loans for people on benefits are a dime a dozen. In the current scenario, very few lenders may be willing to sanction these loans. The reason for their reluctance can be summarized as follows.

The Feasibility

Generally, people who receive benefits need the same for supplementing their income. In fact, a few of them may be unemployed and may be relying heavily on these benefits for making ends meet. Such people may find it difficult, if not impossible to repay the borrowed sum.
Typically, people who are unable to repay their creditors, get sued. Creditors try and recover the money that is lent by getting a writ of wage garnishment. The writ allows creditors to withhold a portion of the debtor's salary, in lieu of the unpaid amount.
It's evident that, people who are unemployed are risky investments for the money lender, since they can utmost consider a writ for garnishing the borrowers' unearned wages. As per Federal law, creditors cannot garnish a person's income, if the source of the income is a combination of Social Security (SSI).
Benefits like Veteran's, unemployment, public assistance, disability, retirement plan, workers' compensation benefits, public and private pensions, survivor's benefits are exempted from garnishment, assuming the money is deposited in a bank and available for the consumer's daily needs.
Social security, workers' compensation awards, and unemployment or disability benefits can only be garnished for unpaid child support. However, if the money is invested in some form of permanent investment, then creditors may be able to secure a writ of garnishment.
This discussion makes it obvious that, a very small window of opportunity is available to creditors for recovering the money that is lent. Assuming that these loans are structured like 'no fax payday loans', the borrower is expected to have a checking account that has been operational for a period of 60-90 days.
The consumer, who is expected to have attained the age of 18, is required to provide the checking account number to the lender, who deposits the amount directly into the bank account of the former. The borrower is expected to repay the amount at least by the next pay day, assuming that he/she holds a job.
Since risk and return are directly proportional, the lender levies a huge annual percentage rate on the borrowed sum. If the borrower has a job, the lender may require the borrower to present him/her with a postdated check.
A lender, who is unwilling to roll-over the check, may en-cash the same on the ensuing pay day. Absence of funds in the borrower's checking account, results in a bounced check and the same is reported to the ChexSystem.
Some lenders provide same day loans for people on benefits, if the borrower has a collateral. The loan is akin to a secured personal loan, and may result in the borrower losing the collateral in the event of being unable to repay the borrowed sum.
From this discussion, it's clear that same day loans are provided by lenders, not on the basis of the benefits that are received, but on account of factors like the availability of a collateral, or the ability of the borrower to repay the borrowed sum using his/her wages.