Recent market research shows that many American consumers avail of over six cash loans annually.
Public consumer research groups disclosed that average yearly percentage of this type of credit is a high point of 470 percent. Another independent study indicated that approximately 33 percent of payday lending firms achieved a yearly rate of 500 percent on said loans. In fact, there are some cities where lending outlets outnumber the combined 7-Eleven convenience stores and Starbucks coffee shops. There are several reasons for the increasing popularity of these quick advances. It provides instant solutions to the public in the event of cash shortages.
Instant Cash for Borrowers
These 1 hour loans are simply amazing. You get the money as soon as you need it. This concept is made more popular by all the media hype. Advertisements proliferate in the web, television, radio and local publications. A lot of credit facilities have already diversified their services to include short term loans for added profitability and faster returns on investment. Sometimes, these mortgages are referred to as “deferred deposit loans”. With these transactions, you prepare a post-dated check for the amount you borrowed to include service charges. The payday loan company will draw this from your savings or checking account on your following payday.
Service fees are quite high which amount to 20 percent for every $100. More borrowers choose this scheme since no collateral is required. The market of payday loan lenders includes regular employees with stable jobs and holders of check deposit accounts. These are individuals who need money quickly to pay off some important bills. Creditors focus on middle and low-income families who have no access to credit institutions and credit unions. Even a number of grocery outlets offer this kind of loan. Online lending facilities also operate this specific enterprise. Loan transactions done through the web are very fast without any requirements and paperwork.
Precautions for Payday Loan Clients
Despite its growing fame, the federal and state governments along with private financial entities have warned the public to consider the consequences before availing of quick payday loans. The truth is loans from direct lenders can have more adverse effects on borrowers in the long term. One is the relatively high interest rates that you need to contend with until the loan is fully paid. Guaranteed loans can even damage your credit scores because of default payment. Some banks are not keen on considering consumers who borrowed money from direct lenders for payday loans for any financial transactions.
Furthermore, the amount that you can borrow is limited since this will depend on your pay check and normally does not exceed $1,500 for one loan. You have to look for other sources in case you need a bigger loan. The entire process of instant cash loans is conducted online so it may be necessary to provide confidential personal and financial data which includes your bank account details. Hence, security is always compromised and vulnerable to fraudulent individuals. Incidentally, all electronic checks are given to the borrower also through the Internet.