The Payday Loan Boost – More and More People Decide On The Fast and Simple Cash Borrowing
According to the Pew Charitable Trusts’ Safe Small-Dollar Loans Research about 12 million US citizens have used some kind of a payday loan in the year 2011, most of them agreed 8 such transactions. The number of payday loan businesses in constantly increasing. This kind of loan is becoming more and more popular in Europe, too, especially in the UK.
What is a secret of the success?
There are probably numerous reasons for the payday loan boost.
In the post-financial crisis times, banks have tightened their rules and criteria, which has closed the its door for many average citizens. Being a bank’s unwelcome clients, many people have turned on to the alternative ways of crediting. A payday loans have become one of the most common. Besides, people just don’t want to deal with the complicated banking system for a small amount of money needed. A payday loans have obviously become a preferable way to to leverage personal finances to many people.
People borrow money this way when they need some emergency cash. The procedure is quite simple and fast, with practically no risk, if you have a regular income. The amount allowed is usually up to 50% of borrower’s expected salary, and the payment is agreed on the expected paycheck date. It’s actually some kind of a pay in advance, so there’s a little risk for any of the two contractors. The payday loan businesses secure the refund by the borrower’s income, so they don’t do the credit check and don’t ask for a collateral, which shortens the procedure and makes the loans accessible to people with not so good credit rating. If the business is done online, the procedure is even more simplified; in general, the borrower completes the application form within minutes, gets immediate feedback; approval or disapproval, and gets the money on his account in a day or two. The lenders often display their fees and interest, so the client is able to calculate his total cost very simply.
As every short term unsecured borrowing is expensive, so is this one, as well as account overdraft and credit cards are, but the increasing number of lenders makes the competition stronger and stronger, so the trend if interest rate increasing is not to be expected.
The market speaks for itself
When a strong competitor penetrates in the market, the existing leaders on that market respond. In this case financial institutions aggressively insist on the bad side, ignoring the advantages. So the payday loan lenders are under the public magnifying glass. There is a strict legislative for the business, and in some states this kind of lending is still restricted. But the market’s increasing demand, even in the states with restrictive law, speaks for itself and can hardly be silenced.