The payday loan industry is a wild industry. Over the years, lenders and borrowers have constantly fought. It appears that borrowers do not want to repay their loans because of the high interest rate, whereas lenders only want borrowers to respect the contract they have signed.
Online payday loans are supposed to be short term loans issued in case of financial emergency. They are very different from bank loans, credit cards, lines of credit and mortgages. A payday loan is much faster to receive and is much easier to obtain an approval than other loans. The nature of the payday loan makes it an extremely dangerous loan for the payday lender; as people receive loans with less dam on their financial history. For these reasons, a payday loan has a higher interest rate to mitigate the risk.
Some may say, “Why give loans to high-risk borrowers?”The answer is simple: if cash advance lenders do not issue payday loans, 78% of people in Canada and the United States will not have access to a source of credit. Most people nowadays have bad credit and if the banks do not lend them in time of emergency, it leaves a multitude of people in search of money. It is clear that some of these people will resort to criminal measures to obtain the funding they need; while others become beggars. Online payday loans have helped millions of people in their darkest hours. They saved people from the power loss at home, saved the lives of those in need of funding for their drugs and hospital bills. However, the positive effects of payday loans are never mentioned.
It is interesting to note that many people who complain about the high interest rate of payday advances have at least two payday loans. If they were so dissatisfied with payday loans and the interest rate, what allowed them to take out more loans? Some borrowers are crooks who have never intended to repay their loan. Many online payday loan borrowers have a history of unpaid loans and have credit scores that cannot be repaired. These types of borrowers, whose credit history cannot be repaired, are not worried about repayment because their credit cannot be worse. Later, they join the payday loan campaign alleging that lenders and their interest rates are criminal. Worse still, the Financial Conduct Authority has changed the number of times a lender can access a borrower’s bank account to recover money promised only twice. This helps criminal borrowers make money from lenders and never repay them.
Obviously, all borrowers with bad credit do not intend to repay their loans. Some borrowers are good people who intended to behave honestly but have had difficult times. Life tends to throw people 2 or obstacles at a time. It is understandable that borrowers face difficult times and find it hard to get their money back. This is why payday lenders offer a re-borrowing option that allows borrowers to defer their loan until their next paycheque. This implies that a borrower repays his loan on the repayment date with the option to re-borrow on the same day or a day later. This has the effect of lengthening the time available for the borrower to repay the loan. In 2014, the payday loan business was forced to change the loan repayment policy of the Financial Conduct Authority, which required lenders to reduce the amount of loans to be repaid by a borrower at a cost.
Regulators in the payday lending sector seem to focus on lenders but fail to treat borrowers who accept the terms of the loan agreement and fail to meet its terms. Like any other contract, cash advances must be respected. Lenders give money to people in need the very day they ask for it, with a minimum of hassle and that’s what they thank.