Traditional Bank Loans are Declining | Payday Loans Pick up Slack

Payday loans are becoming staples of budgeting

With traditional methods of finding money quickly diminishing, payday loans are becoming increasingly popular. The failing economy is forcing lenders to drastically cut their underwriting budgets. This is a sharp turn from last year’s overzealous lenders who were handing out loans left and right. Because of their past imprudence, the market has gone into a frenzy of chaos and the recession has taken over.

Getting money is a difficult task for even those with perfect credit and collateral. The average American however, has neither. Payday loans are becoming a reasonable and reliable way to budget and get through a month of payments. Payday lenders are seeing the growing need for their services and making the application process as streamlined and automatic as possible. If a consumer is over 18 years old, has a job and an active checking account, they can apply for a payday loan. Credit isn’t a factor, so it bypasses the traditional requirements of finding a lender. If approved, funds are deposited directly into the applicant’s account and they receive the amount they qualified for within a few days. Bills are covered, and the lender is repaid with the applicant’s next paycheck. A fee is included with the service, but the result is well worth it.

Commercial and Industrial loans fall 47%

Despite receiving billions of dollars in government bailouts, bank lending fell drastically in February. According to the Treasury Department’s survey of lenders, the biggest banks showed a 47% decline in lending. Conventional loans are quickly becoming things of the past and those who can get them are becoming fewer and fewer. A spokesperson for The Treasury Department stated that “The relatively steady overall lending levels observed likely would have been lower absent the capital provided [by the government.]” In spite of the bailout, consumers have not yet benefited directly. The doors are quickly closing to millions of Americans who are looking to lenders for answers to their money woes. The estimated time for any tangible improvement to be seen by consumers is mid-2010. It most likely will take that long for lower-income Americans to benefit from the government’s bailout.

Payday lenders in the mix

Payday lenders are not seeing the same decline, however. Their businesses are extending cash to customers more than ever because of the unique loan structure. With bills adding up, and traditional lending options unavailable, consumers are finding payday loans to be the most viable, and reliable options for getting through a month of payments. Tight budgets and growing unemployment lines are causing Americans to find non-traditional ways of maneuvering debt.

Is the payday loan the answer?

The question remains whether a payday loan is the answer to your need. Ultimately these types of loans were created to handle emergency bills. The ideal customer is one who has the money, but just not yet. They are one payday away from being able to cover the expense and need some up-front cash to tide them over until that day. Because these are very short-term loans, huge interest rates don’t normally eat away at repayment and payback is automatic. With a struggling economy and traditional lenders becoming stricter with requirements, payday loans are surfacing as a reasonable funding option.