The payday lending industry has seen a dramatic drop in payday loans, down 39% since the pandemic hit. With many people out of work and payday lenders struggling to make enough money, this is not surprising. However, it will be interesting to see how this affects payday lending long term.
How does the payday lending industry work?
Payday lenders make their money by charging high interest rates on the loans they offer. This means that borrowers often have a lot to pay back, and can find themselves stuck in a cycle of debt if they cannot repay all at once
Payday loans are meant to be repaid quickly, usually within a couple of weeks. If they cannot repay the loan by their due date, borrowers can find themselves paying a hefty fee for each day that it is late.
Payday loans are a type of cash advance, and as such, they have higher interest rates than traditional payday loans. While you might pay around $15 for every $100 that you borrow with the latter, payday loan companies can charge up to $30 per installment on an online payday loan – so if your payments are due weekly, this means paying back over 600% APR!
In 2017 alone there were 11 million Americans using payday lenders during times when their bank accounts were low or empty. Many people turn to high-cost short-term credit because they do not have any other way of covering unexpected expenses – but the truth is that it is never worth taking out quick money like these small loans unless it’s absolutely necessary. Payday lenders know that they are providing a valuable service, but the truth is that payday loans do not provide any real value to their clients.
How do pandemics affect the payday lending industry?
Since payday lenders are relying on people being able to repay the loans that they’ve taken out, it is no surprise that payday lending has dropped so significantly during this pandemic. With many Americans unable to find work and struggling to pay their bills every month, payday lenders do not have enough clients coming in the door anymore.
The high-interest rates charged by payday lenders mean that if someone cannot afford to repay the loan straight away – when money is tight for most people because of a pandemic – then there’s almost no chance they’ll be able to at all. This means that customers who would normally rely on payday loans will turn elsewhere instead; pawnbrokers, credit unions, or family members who might lend them small amounts until things get better financially (and they can get back to payday lenders).
The rise of payday lending and the decrease in payday loans is not surprising. However, it will be interesting to see how this affects payday loan companies long term – especially if other sources for quick cash dry up too.
Closures and decreased demand for payday loans
Since payday lending has dropped significantly, it is no surprise that payday loan companies are closing their doors. Customer demand for payday loans has decreased drastically since the pandemic hit due to increased unemployment rates and fewer people being able to repay these loans. With many payday lenders struggling to make enough money, more of these companies will likely close down in the coming months which will be bad news for people who rely on short-term loans during times when they need cash. The rise of payday lending and the decrease in payday loans is not surprising – but it could mean big changes ahead for this industry if other sources of quick cash dry up too. Payday lending may never come back the way it was before – but there might be a light at the end of this tunnel.
Giving consumers a grace period for paying off loans
Due to these payday lenders not having enough customers coming in the door anymore.
I believe that payday lenders should consider giving clients a grace period for paying off loans before charging interest rates. This would be beneficial because it allows them time to get back on their feet financially without being punished with high interest percentages which they probably cannot afford at all! Payday loan companies might just have another market if they changed some of their policies, even after people recover from this flu epidemic – but only time will tell what happens next… I think payday lenders should give consumers a grace period for payday loans before charging interest rates.
This would be beneficial because it allows them time to get back on their feet financially without being punished with high interest percentages which they probably cannot afford at all! Payday loan companies might just have another market if they changed some of their policies, even after people recover from this flu epidemic – but only time will tell what happens next…
“If you are looking for payday loans, it is important to make sure that you find a reliable payday loan company. This isn’t as easy as it sounds and many people end up wasting their time (and money!) before they find one who can help them out of these situations – we’re here to help!” says Rakin Bower of KashPilot. We’ll walk you through the process easily and hopefully get your cash into your account quickly too.
