Payday lending businesses have always got much controversy around them. They are not really much liked by banks and are considered predatory by many people. They say that payday lenders take advantage of borrowers living on tight budget and striving to make ends meet. They position it as emergency help and as fast loan that can be obtained in very short time. However, they tend not to stress the most essential aspect of such lending and it is high interest rates for such loans. When asked, lenders justify their rates as appropriate for such short term loans and if they start charging smaller rates, there will be no sense in the business and there will be no profit.
There is some point to it to some extent. When you take some local company in your area and make some sort of analysis, you will see that they definitely have to gain some profit in order to cover all their expenses. They have rent to pay and staff to pay wages to and all the rest of the taxes and utility bills and etc. This is not small money; and in certain terms the rates that payday lenders charge are comparable with the credit card ones with the only difference that the latter are long-term loans and payday ones are short-term and are a bit harder to repay. It is hard for payday loans to compete with banks and the latter do not have any liking of them.
The reason of bank’s dislike of payday lenders is that the latter basically take their bread. People prefer to apply for the fast and convenient services of instant payday loans online instead of going through the tedious bank procedure with all the lines and credit checks and paperwork. The application process in payday lenders office is much faster and if the procedure is carried online, things get even simpler. In this case no customer will choose a bank with its wait of approval and the prospect of being refused.
In a bank a person gets free checking account and they hope for some mistake when a person bounces a check. Then there is a $30 charge for overdraft and when it comes to payday lenders, they offer small loans such as starting from$100 and up to $500, aiming to help a person with emergency expenses. This looks much more appealing in comparison with all the banks and their overdraft fees.
There is also one more thing that banks have against payday lenders and it is that they are unable to attract so many customers for their long-term contracts as payday lenders get with their short-term loans. The thing is that the majority of people need small loans for short time but they have to take a minimum $1000 loan from a bank that they actually do not need. In case of payday lenders they can get exactly the amount they need and this looks very beneficial and advantageous.
With banks everything is always complicated. When it is a secured loan, a person has to provide something to be pledged as collateral and this is complicated for many people who have no valuable possessions such as cars or houses. With payday loans things are easier and the requirements are few. There always has been and there will be the rivalry and hostility in these two camps, there is nothing to do about it.