Statistics don’t lie. In 2012, the Pew charitable trusts conducted research on payday loans. They dived deeply into the subject to discover the average annual percentage rates charged by payday lenders, the most affected section of the population, and remedial action for the menace. Firstly, they found that the average APR for payday loans is 400%. Furthermore, it was noted that almost ten million millennials had taken out these loans, and a majority were white women between the ages of 24 and 40, those without college degrees, those renting houses, African American, and low earners in that order. Also, another scary statistic is that most of these loans (69%) were used for daily expenses.
There were regulations aimed at protecting the unsuspecting borrowers from unscrupulous lenders; however, the government has moved in to rescind those laws. In this article, we shall discuss some of the compelling reasons why the majority of millennials are attracted to payday loans.
One advantage of a payday loan is that you won’t need to provide any papers apart from proof of employment, such as pay slips and identity information. It makes applications to be much easier and shorter. Also, the lenders will not need too much time to approve a loan. With traditional lenders such as banks, one would have to submit loan applications and wait for more than a month before getting feedback on loan.
Also, advanced payday loan lenders have online platforms where a prospective borrower can submit an application and wait for feedback from the lender. This is even more convenient as it takes the shortest time to have your loan approved. Also, with payday loans, you will be written a check from which you will bank it and get cash. This is more convenient when compared to the credit cards, which, when approved, you cannot get some money, it can only be used to pay for services and goods. Furthermore, one can be able to use the money on anything. It is not monitored or controlled by the lender as for the case of other loans such as business loans or auto loans. Besides, with payday loans, one does not need to book an appointment to meet the lender. With your identity notification, a bank account, and proof of employment, you can simply walk into the lender’s office and request for financing, which shall be provided.
Poor credit scores
It has been confirmed that a majority of millennials countrywide have poor credit ratings. This condition alone is enough to push them to take payday loans in Singapore since they cannot qualify for other loans in the market. Poor scores indicate that you are financially irresponsible, which means that the risk the lender carries to approve funds to you is significant. Adding to the fact that most of them do not have substantial assets to use as loan security, it becomes clear nine million of them have taken these loans in a span of just two years. For more tips on how to manage your loans check this website.
Payday loans do not give attention to credit bureaus. They don’t pull credit checks and the history of the individuals who wish to take a loan with them. Since there aren’t many lenders with such luxury, millennials will end up getting attracted to these loans and shy away from the rest.
One can qualify for a higher amount
Beginners are limited to the amount of money they can borrow. The amount is limited by the salary one receives and the range the lender sets for the borrower. However, the debt is paid in time and in full. Then the limit is increased. So, in your subsequent applications, you will be allowed to borrow more money than you did in your first try. The secret to qualifying for more funds lies in your ability to create a positive relationship with the lender by timely repayment of the money you owe. The maximum amount of money one can possibly qualify for is dictated by the government or state regulations. Your salary also has a role to play in determining the amount you can be eligible to apply.
Short credit period
When repaid early, payday loans can be taken to facilitate a faster transition from debt repayment. Installment loans have more extended periods of loan repayment. Unfortunately, incidences can happen that might affect your loan repayment. Defaulting on your loan will present a bad credit case for you since you may have a slump in your credit ratings. And, if you had taken the loan against collateral, then you may lose your asset through repossession by the lender. You can conveniently prevent such a scenario by taking short-term loans such as payday loans, which will last just a fortnight while you are in debt. Millennials cling to this promise of getting into debt and walking out before long. Statistics, however, prove otherwise.
Do not send credit reports to the credit bureaus
As stated above, payday loan lenders do not retrieve a prospective borrower’s credit history from the credit bureaus. Also, they do not report the credit conduct on an individual to the bureaus. Therefore, if you default on the payment, you do not have to worry about your credit scores plummeting. The blade cuts both sides here; since, if you repay your loan on time, the conduct will not be reported on the credit bureau to build your rating either. It protects your credit rating from further damage, and at the same time, it doesn’t participate in rebuilding it.
The bottom line
It is safe to say that payday loans can work for those who desperately require financing but do not have what it takes to qualify for installment loans. Therefore, they would instead get a costly loan, which might lead them into a cycle of eternal debts, missing out on funding. Most of the time, the vision by the millennial to take out the loan and repay it in the two weeks it matures and forgets about it backfires on them. And, they are left burdening with hefty loans that never seem to end.