Payday Loans: Genuine personal loan alternative?
Usually associated with dodgy pawn shops, shady loan sharks and accompanying astronomical interest rates, Payday Loans have seen some significant shifts in recent years.
There is now far more government regulation of payday and short term lenders and the rates that can be charged to consumers have been capped Australia-wide.
Payday lenders: Pushing the personal loan industry
One of the most interesting developments in the personal loans market is the solution offered by newer innovative online businesses who can provide money to an approved customer within much quicker time frames than more traditional lenders have been able to. Convenient short term small cash solutions are literally revolutionising how we borrow – and the debt that follows.
In the digital age, with people doing their shopping and banking online, there’s no reason why we shouldn’t be able to apply for and manage a short term cash loan via the Internet also. New online lenders are redesigning the landscape by offering easy to manage finance solutions. One by-product of this development is extra pressure on traditional larger lenders to keep up with the Joneses – essentially by improving customer service and their range of product options.
Many of the new breed of lenders offer borrowers an online application process and cash payouts that are advertised as being same day or within several days. It would be easy to assume that these companies lend to everybody and don’t perform credit checks but that’s not the case. You might be surprised to find that full credit checks and personal detail verifications are performed and many customers that borrow from these lenders are prime or near-prime borrowers.
All lenders are required by law to lend responsibily, which includes making detailed inquiries of your personal circumstances. Short term lenders are required by law to request 90 days of bank statements from a customer as part of these inquiries.
When a Payday Loan may be the right option
Conventional personal loans are still the mainstream option for borrowers who are after larger amounts of cash for a long period of time. However as a short term solution these traditional products have never been great value. Given this fact, the new option of online short term loans is certainly food for thought. With the loan amount tailored to a customer’s needs, the online application process and cash potentially transferred within a day or several days, the solution certainly offers a compelling argument.
It’s true that compared to traditional personal loans, Payday Loans are more expensive, however there are some things to consider. Payday Loans only run for periods as short as one month, so as with any short term service (consider a short distance in a taxi for example) certain fees are bound to apply in order for operators to realistically afford to offer this service.
Payday Loans have certainly made their mark in recent years as an alternative to credit cards and large personal loans. As with any finance product, it’s crucial to match the loan to your needs – you should always be aware of all and any details regarding fees and rates for all borrowing you undertake. Payday loans should be considered a last resort as there are many other financial alternatives that can first be explored.