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I don’t quite understand the benefit. Surely, if you have to take loans to get over the month, this won’t change anything as your overall income is still the sa

I don’t quite understand the benefit. Surely, if you have to take loans to get over the month, this won’t change anything as your overall income is still the same. I guess for unexpected expenses, you can bridge the gap one-time by borrowing from future-you. What am I missing?

pjc50 5y ago
Cashflow, the same as for busineses. If you don't have one months' spare cash as a "float", then you may have to resort to lending at the end of the month.
- Semaphor 5y ago
  But again, this reduces next month’s income. So you’ll end up having the same problem every month. Unlike with companies, employed people’s income doesn’t vary between months (or maybe it does for some?).
  - meheleventyone 5y ago
    Yes it’s a trap which is why a lot of people see it as predatory particularly as the interest rates are (used to be?) obscene. Payday lending companies can become a leech on poor people. This looks a little different to the usual structure of payday lending but still has the issue you point out.
  - pjc50 5y ago
    > So you’ll end up having the same problem every month Yes. This led to the UK FCA trying to ban rollover loans: https://www.fca.org.uk/news/news-stories/tougher-rules-payday-lenders-take-effect https://www.fca.org.uk/news/news-stories/tougher-rules-payda... > employed people’s income doesn’t vary between months (or maybe it does for some?). Exactly: gig economy, variable shift patterns, tipping, benefit payments, delayed cheques, freelancers of all sorts, delayed payment of debts by customers, seasonal employment, sudden unemployment, seasonal expenses, etc. (That said, this app only works for payments from one employer, but I can see it working well for the service industry)
  - dagw 5y ago
    employed people’s income doesn’t vary between months. As you mentioned for some it does (overtime etc.), but even if 'gross' income doesn't vary month to month, expenses can vary massively and so your total 'net' income can be very different month to month.
- Grustaf 5y ago
  The solution to that is not to live even closer to the edge.
  - pjc50 5y ago
    The solution to being poor is to have more money, yes. (You're going to reply to this with "just cut expenses", to which I can pre-emptively reply that some of the people in this situation are already choosing between food and heating. I'm going to pre-emptively cite the link from the other branch of the thread, https://www.fca.org.uk/news/news-stories/tougher-rules-payday-lenders-take-effect https://www.fca.org.uk/news/news-stories/tougher-rules-payda... > We found some firms were using [continuous payment authority] as a debt collection method and that some borrowers therefore had difficulties paying for essentials such as food and heating. )
    - Grustaf 5y ago
      Even if you assume that their income is entirely fixed, I don't think you believe that all of them live exactly as cheaply as they possibly can. I'd say if you can possibly survive without the heating, then it's better to do that for a while than borrowing money and end up even more dependent on your salary, being a week away from ruin rather than a month. In short, payday lending is a short term solution that make things worse in the long term, even when it is free of interest.
  - scrollaway 5y ago
    "Thanks I'm cured" What's your revolutionary idea there? People wouldn't be poor if only they had more money?
    - Grustaf 5y ago
      It's not very revolutionary but making it easier for people to save is a better long term solution than making it easier to get into debt. Remember that we are discussing this on a solutions level, not an individual level.

pjc50 5y ago

Cashflow, the same as for busineses. If you don't have one months' spare cash as a "float", then you may have to resort to lending at the end of the month.

Semaphor 5y ago
But again, this reduces next month’s income. So you’ll end up having the same problem every month. Unlike with companies, employed people’s income doesn’t vary between months (or maybe it does for some?).
- meheleventyone 5y ago
  Yes it’s a trap which is why a lot of people see it as predatory particularly as the interest rates are (used to be?) obscene. Payday lending companies can become a leech on poor people. This looks a little different to the usual structure of payday lending but still has the issue you point out.
- pjc50 5y ago
  > So you’ll end up having the same problem every month Yes. This led to the UK FCA trying to ban rollover loans: https://www.fca.org.uk/news/news-stories/tougher-rules-payday-lenders-take-effect https://www.fca.org.uk/news/news-stories/tougher-rules-payda... > employed people’s income doesn’t vary between months (or maybe it does for some?). Exactly: gig economy, variable shift patterns, tipping, benefit payments, delayed cheques, freelancers of all sorts, delayed payment of debts by customers, seasonal employment, sudden unemployment, seasonal expenses, etc. (That said, this app only works for payments from one employer, but I can see it working well for the service industry)
- dagw 5y ago
  employed people’s income doesn’t vary between months. As you mentioned for some it does (overtime etc.), but even if 'gross' income doesn't vary month to month, expenses can vary massively and so your total 'net' income can be very different month to month.
Grustaf 5y ago
The solution to that is not to live even closer to the edge.
- pjc50 5y ago
  The solution to being poor is to have more money, yes. (You're going to reply to this with "just cut expenses", to which I can pre-emptively reply that some of the people in this situation are already choosing between food and heating. I'm going to pre-emptively cite the link from the other branch of the thread, https://www.fca.org.uk/news/news-stories/tougher-rules-payday-lenders-take-effect https://www.fca.org.uk/news/news-stories/tougher-rules-payda... > We found some firms were using [continuous payment authority] as a debt collection method and that some borrowers therefore had difficulties paying for essentials such as food and heating. )
  - Grustaf 5y ago
    Even if you assume that their income is entirely fixed, I don't think you believe that all of them live exactly as cheaply as they possibly can. I'd say if you can possibly survive without the heating, then it's better to do that for a while than borrowing money and end up even more dependent on your salary, being a week away from ruin rather than a month. In short, payday lending is a short term solution that make things worse in the long term, even when it is free of interest.
- scrollaway 5y ago
  "Thanks I'm cured" What's your revolutionary idea there? People wouldn't be poor if only they had more money?
  - Grustaf 5y ago
    It's not very revolutionary but making it easier for people to save is a better long term solution than making it easier to get into debt. Remember that we are discussing this on a solutions level, not an individual level.