Many see the rise of the payday loan industry as a direct result of the recent global economic turmoil. After the huge financial crashes experienced in the UK, US and the rest of the worlds, banks tightened their belts. This meant that they simply weren't prepared to lend to customers like they would previously.
These restrictions led many to seek alternative borrowing solutions. One of these was the short-term payday loan.
But this wasn't just an opportunistic industry springing up from others misfortune. Payday loans are a product of the demands of modern consumers. People are seeking quicker solutions to their financial problems. Equally, many don't need to borrow huge amounts of cash. Instead they just need a little extra to get through to the end of the month. Again, the payday loan is a fantastic solution to this problem.
Businesses and individuals have been offering short-term loans for decades. Whilst payday loans might be a name that was coined relatively recently, it's not a practice that has sprung from nowhere. In fact, because of tighter regulations and strict regulatory bodies, it is a far more controlled form of borrowing than many of its similar predecessors.
The Internet has played a major part in the popularization of payday loans and it has also helped it to grow as an industry. Without the immediacy provided by the web, most companies wouldn't be able to actively compete or provide the same level of services to clients. However, now lenders can simply ask customers to complete a brief application form and use those details to provide a near-instant decision. Again, this simply wouldn't have been possible without the Internet.
Payday loans are often used simply as a parachute, helping borrowers to steer clear of major financial difficulties. You certainly don't want to become reliant on them, as it can quickly get quite costly. But the fact that they are widely available and quick to access means that it's an easy go-to for so many. As more and more people start to discover them, companies have grown to accommodate their needs.
Therefore it would be fair to say that rather than withering, the payday loan industry is actually thriving. In the last few years, the visibility of companies has increased many-fold. Payday lenders are now engaged in major advertising campaigns, including gaining TV slots and event sponsorship. This has only helped to solidify the notoriety of the industry and should serve to help secure its place within the minds of borrowers moving forwards.
Of course there is every chance that it could one day change or even evolve; however, payday loans don't appear to be going anywhere in the near future. Legislation is likely to change though, with tighter rules imposed on lenders to safeguard borrowers. Of course this is no bad things, but it could certainly change the way in which applications are handled moving forwards.
A cap on APR is one of the suggestions that has been mooted by some. If this, or any similar legislation were to be implemented, it could mean that payday loan companies have to seriously readjust their services and possibly limit the availability of money to higher risk borrowers.
The current openness of the industry has certainly enabled it to grow exponentially. With cash available to anybody in employment and over the age of 18, it really rejuvenated the loan market and provided a viable alternative for those borrowers who don't have a perfect credit history. Whether or not it will maintain enduring popularity will largely depend on changes imposed upon the industry and if customers continue to demand short term lending options though.
