Why Personal Installment Loans are Exploding in Popularity
It happens every day in cities across the country.
Work-a-day Americans find themselves short of cash. Maybe their hours have been cut. Perhaps they experienced a medical or family emergency. Most likely, though, they’ve simply run out of money to pay the bills and need to find a way to get through to the next payday.
So they turn to personal installment loans for relief.
Yes, small personal loans are exploding in popularity. Here’s why:
1) Applying for a personal installment loan is simple
The way personal installment lending works is actually pretty simple–much, much simpler than the process involved with applying for and obtaining a loan from a traditional bank.
Where traditional banks require a lot of documentation, paperwork and perusing of job history, references and credit reports, personal loan lending often only requires that you have a job and a valid government identification card.
It works like this:
- A person in need of quick cash visits a personal lending company.
- The company requires proof of employment, a checking account and proper identification.
- Once the loan applicant produces those three items, they are typically approved for a small personal loan in the amount of anywhere between $100 and $5,000.
- The applicant then writes a post-dated check to the lender in the amount of the loan, plus a fee that is typically 15 percent of the total.
- On the applicant’s next payday, the loan is either re-paid in person by the applicant or an installment plan is created to pay back the loan over time.
There is no fuss, complicated approval process or judgement passed down by the lender. It’s just a simple transaction designed to help out a person in need. In fact, the typical first-time online personal loan application process tends to take no more than a few minutes.
Small personal loans typically don’t require an extensive credit history
Life happens–and it isn’t always pretty.
This is especially true for young people who are just getting started and trying to build a solid foundation.
They may have jobs, be in school, have just signed leases on their first apartments or become parents. They’re working hard, doing everything right … and then life happens.
A car accident. Unexpected illness. The washing machine breaks.
All of these things–and more–can happen at any moment and wind up costing a lot of money.
For those with a lot of money in their savings account or a long and impressive credit history, unexpected expenses might not qualify as emergencies. They can tap into their savings accounts or get loans pretty easily.
But for those who are just scraping by or who do not have a long credit history (or good credit or any credit at all), unexpected expenses can send you into crisis mode.
Thankfully, they can turn to personal installment loans to get access to quick cash that can be used for emergency purposed.
After the Great Recession struck in 2008, many people lost their faith in traditional lending institutions.
People lost their jobs. Families lost their homes. Cars were repossessed and many wondered what had happened to the “American Dream,” which was largely built on the belief that banks had the backs of Americans from all walks of life.
Many people turned their backs on banks and other traditional lending institutions.
They did not want to be roped into long-term contracts that were designed to help bankers get rich. They simply wanted financial products that helped them get their hands on the money they needed, when they needed it, without having to turn over months or years of their lives to get it.
Enter: personal and installment loan lenders.
The terms of most payday loans are for 30 days or less. They are specifically designed to help people get by until the next payday. It’s a temporary solution, designed to help the person borrowing the money.
People like that.
Imagine you want to purchase a new gaming system, television or phone. Or you have to fix your car, take a trip to see a loved one who is sick or pay for an emergency medical procedure for yourself–but you don’t have the cash right now.
You have some options.
You could put off spending the money until you’ve saved enough, which might make sense if you’re buying a TV, but probably isn’t feasible if you need an emergency medical procedure.
You could apply for a short-term loan from a bank, but unless you have stellar credit and a slew of references, there’s no guarantee you’ll be approved. And even if you are, the process could take a week or more.
You could also put the expense on a credit card, which will likely charge you a lot of interest, allow you to make “minimum payments” over the course of many months and wind up costing you a lot more in the long run.
Or you could visit a payday lending company, get the money immediately, take care of business and pay it back the next time you get paid.
Sure, you’ll pay a fee that is about 15 percent of the total value of the loan, but that will likely still wind up being less than what you’ll pay if you choose the other options (besides saving for the expense).
Relatively low interest rates (if the loans are paid back within a few weeks) are one of the key reasons the popularity of payday loans is soaring.
Many people don’t like talking about money, much less being judged for their current financial status by bankers, friends or family members.
The relative anonymity that payday lending provides is one of the most important reasons it is proving so popular.
People don’t have to bare their financial soles to bankers, who will then hold their financial futures in their hands while they sit back and evaluate the loan applicant’s past, present and future.
People also don’t like to tell friends and family members that they are in financial need. They don’t want to cause a scene, don’t want to be judged and simply don’t want the people they know in their personal business.
What they want is access to a simple, helpful loan. And that’s exactly what payday lending provides.