The reason why payday loans are popular is that no credit check is involved and you can get the funds quickly. Image from Wikimedia Commons.
One of the reasons people get payday loans is that a payday loan is a no credit check loan. People who need cash advances do not have to get their credit scores checked. Those scores do need to be checked for credit cards, or for an installment loan from a bank. In fact, many customers get payday loans because there aren’t any loans for bad credit available from the banks or credit unions they have accounts with.
No banks offer payday loans for a reason
As short term, small dollar consumer lending became less popular with banks and finance companies, the market dried up. By the end of the 1980s, the financial product now called a payday loan was beginning to take shape. Banks and credit unions do not offer a payday loan type of product. Most of them don’t intend to, either. A cash advance lender can offer more loans to more people for a lot of reasons. One of those reasons is the hours. A bank that is open on a weekend is a rare one.
Payday loans with no credit check
The reason behind the existence of payday lenders is that they offer a small, short term credit product that mainstream financial institutions do not. They also do not require membership. A payday loan can also be secured without submitting to a credit check and only takes minutes, rather than hours or days. A payday loan also does not require collateral, whereas a car title loan or pawn loan does.
The banks cannot compete
Payday loans are more convenient than securing a line of credit through a traditional institution. The relative ease of access and the lack of need for collateral in addition to the absence of a credit check or reporting to the credit bureau are, in fact, the primary appeals and functions of the product. The idea is to provide credit to people who can’t get credit and not have it affect their credit. You can read more in the payday lending facts and statistics report on Personal Money Market.
