Payday Loans are Growing in Popularity
A new staple in American budgeting
Payday loans are quickly becoming a staple in American budgeting. Although there was a time when these types of loans were considered only useful to low-income families in emergencies, that idea is quickly becoming outdated. In today’s recession, people of all economic brackets are hard-hit by the struggling economy and looking for nontraditional funding to help them pay their bills.
In addition, one of the hardest hit industries of the recession is the lending market. Because lenders were underwriting loans in past years without thought to the borrower’s ability to repay the loan, many people defaulted. The huge number of defaults amounted to huge losses for the industry. As a result, lenders stopped lending to even good-credit applicants. Coupled the lending crash, the spiking unemployment rate meant many Americans were left with few options for handling bills. This is where payday loans found a niche.
Payday loans’ best features
Payday loans are proving useful because of specific characteristics. Here are some of their best features:
- They are quick. When consumers qualify for payday loans, they normally receive funding in 24 to 48 hours. This is why they are perfect for immediate cash needs. A payday loan is one of the only funding options that can be applied for on a Monday to pay for a bill due Friday. Traditional lenders can take days to collect necessary information, and it can take weeks to know if a consumer qualifies.
- They are easy to apply for. Consumers can normally go through the entire application process online and know within minutes whether they qualify. If applicants choose to go into a payday loan store, the process is also very quick. There will be general paperwork to fill out, but the applicant normally knows within an hour whether they qualify.
- Payday loan requirements are much simpler than traditional loans. Normally lenders require applicants are employed, are older than 18 and have an active checking account. Traditional loans have myriad requirements to sort through and can require paperwork from months back.
- Repayment is much more streamlined. Traditional loans come with varying life spans. Payday loans last until the qualified borrower’s next payday. If approved for a loan, the borrower agrees that the loan company will automatically deduct the amount owed from their account. This makes repayment simple for the borrower.
- Credit is not an issue. Because of the life span of the loan, credit scores are normally not a deciding factor for approval. Traditional loans advertise interest rates solely dependent on consumers’ credit scores. With payday loans, that is not the case. The interest rate may be higher than traditional loans, but the time a consumer pays on them makes up for the additional points.
- The purpose of the loan does not have to be disclosed. Payday loan funds can be used for any need the qualifying customer has. Applying for a traditional loan means disclosing its purpose. There are various requirements for mortgage loans, car loans, personal loans and refinance loans. Payday loans are given to customers who qualify with no stipulations on what the funding can be used for.
Usage of nontraditional loans
Using payday loans is becoming more popular as traditional loan options are dwindling because of the recession. Many consumers are thankful there is a new option for finding emergency funding for bill payments. Consumers should look into these types of loans and see how qualifying customers can rest easy and pay their bills on time.