Love them or hate them, payday lenders are everywhere, as the industry is becomes ever more popular with consumers. We take a look into why this industry isn’t slowing down below:
Changes in regulations
This year saw major changes to the payday loan industry, under the jurisdiction of the FCA (Financial Conduct Authority), who passed a series of laws to protect vulnerable borrowers from being pulled into spiralling debt. These new rules and regulations have pushed the payday loan industry into news headlines, increasing their visibility to more people in the UK, who might not have known about this type of borrowing before. These changes have brought in new customers, who can use the industry with a sense of security they did not have before.
Consumers have more disposable income
With the economy improving, consumers are in a better state financially, with a rise in disposable income driving this recovery. People are buying more luxury items, taking more holidays and generally spending much more than they would have previously. This has lead to a change in how consumers use payday loans, now used for everyday use rather than in the past only for emergency and unexpected payments.
Consumers are unable to get help from traditional sources due to poor credit history. When interest rates were high and incomes low, many people had to and still do resort to unwise financial decisions to hold on to their homes and assets. Increasing debt has made it difficult for many to improve their credit scores.
No lengthy contracts
Payday loans were designed to last no longer than 30 days. As the name suggests, they are meant to only provide a short cash boost until your next payday, or to cover an emergency. Their short term duration is appealing as it allows people to cover expenses quickly.
Alternative to traditional loans
Many borrowers find that in order to get the best rates on a personal loan they need to take out large amounts. The smaller the loan, the greater the interest rate, and this can be quite significant if you have a less than perfect credit score. While the interest rates are generally less than those for a payday loan, a loan from the bank lasts much longer, and so will often cost more in the long run. If your need is temporary and immediate, a payday loan can be a more viable and favourable alternative.
Payday loans are convenient for several reasons, starting with the simplicity of borrowing money. A borrower requests a certain amount, for a certain time period, and is told it will cost them a certain amount, which is a lot more straightforward and transparent than many of the more traditional banking products. Most companies that provide payday loans as a service can be found online, providing a lifeline in emergencies.