Debt Woes Lead South Carolinians to Apply for Payday Loans, Cash Advances
By Paul RizzoPayday Loan Writer
As South Carolina consumer groups fight to do away with payday loans in the state, they also need to face a troubling reality:
- Residents are losing their homes and falling behind on their bills at a higher rate than the rest of the nation.
It's al part of the price of the state’s high unemployment rate. High-interest loans such as payday cash advances don't help, either, but many consumers don't know what else to do.
Unlike poverty, graduation rates and other measures that have put South Carolina in the bottom tier of states for generations, South Carolinians’ debt troubles are recent.
From 1979 to 2001, residents kept up with their bills and mortgages much like the rest of the nation. But from 2002 to June 2006, the percentage of foreclosures and late home loan or cash loan payments in the state has been significantly higher than the rest of the nation, said Mike Fratantoni, economist for the Mortgage Bankers Association.
The pattern of debt woes mirrors another major change: South Carolina’s shift from having a lower-than-average jobless rate for the United States - from the late 1970s through 2000 - to, since 2001, having an unemployment rate significantly higher than the nation’s average.
The highest foreclosure rates tend to be in states with high jobless rates and economies tied heavily to manufacturing, especially the automotive industry. This also explains why people apply for no fax payday loans:
They need money for mortgage payments.
“What’s going on in the job market is the primary factor driving mortgage foreclosures,” Fratantoni said.
Refinancings push foreclosures, payday loans: Many S.C. families pay their bills faithfully, but still are only a few lost paychecks from financial calamity, said Schrendria Robinson, director of Consumer Credit Counseling of Columbia.
And when family finances collapse, the reason rarely is reckless spending, but instead divorce, major illness or a layoff. It's unusual for bad credit payday loans to lead to long-term fiscal difficulty.
Also, many families who turned to adjustable-rate mortgages in the past few years might not have realized the danger until interest rates climbed and their incomes dropped.
Nationally, the number of subprime loans - higher interest loans made to borrowers with weaker credit histories - also began rising rapidly in 2003, a cause for concern to Fratantoni.
Foreclosures typically peak three to five years after the first payment. The wave of refinancings that started in 2003 is just hitting that period, he said. Many of these people may have used a payday advance or two in the meantime to tide their mortgages over.
