DIRECT LENDERS

Payday Loans have received a certain amount of bad press because of their high interest rates but if you use them responsibly, they can be a definite upside. There is no denying the fact that these interest rates can be dangerous if not repaid on time and there are also a lot of lenders who are not trust worthy, but if you are a customer with a genuine emergency and are in need of some immediate cash, payday loans are the answer to all your needs. There are times when we cannot anticipate a financial calamity and borrowing money from a friend or a relative is not always the best option. It has included a class of people who, in many ways, were being ignored because they did not match the criteria of institutions offering mainstream lines of credit. These people today have access to these forms of credit and this system has bridged the gap between the banker and the customer. In other words, direct lenders have created the kind of impact that is needed on the population.

Payday Loans direct lenders were initially thought as a short term solution used by people with stable incomes to cover their emergency needs or cover expenses that may arise unprecedentedly, but it has slowly shifted from that to a more mass-scale phenomenon, where people are using these type of loans as an additional source of income, thus leading many into the dreaded cycle of debt.

Payday Lending has become an integral part of today’s financially unstable society and the reason why it is regarded to be unstable is because, in previous years, the volatility of the financial world was being witnessed only by mainstream banks and financial institutions but after the 2008 crisis, it has trickled down to every single individual. Payday Lending came into existence in the 1990’s but was then, not as popular as it is today and their popularity just keeps rising. This is mainly because a majority of people are strapped for cash and are finding it difficult to meet ends to ends. A lot of these people also don’t have access to long term loans and as a result, have no way to meet their expenses on a regular basis.

There are several articles that have been posted over the years relating the practice of payday lending to the great depression. It is a common fact that a majority of the payday lenders are catering to the working class people and the poor who probably don’t have the financial knowledge to understand the implications of such practices. The majority of the borrowers represent the age group of 25-44 years.

Almost a decade after pay day loans have been introduced in the UK, there has been considerable debate over the future of these loans. They were a popular option post the 2008 crisis, as the cash-strapped economy found the offers to be far more attractive, since most of the financial institutions have restricted their lending capacities. There have been several people lobbying for stricter regulations on pay day loans UK, as surveys have indicated that about 2 million Brits were using these loans for meeting day to day expenses rather than emergency purposes. Following these not so positive developments, certain regulations have been put into place in early 2014.

As if this situation could not be worse, where occasional borrowers are being slowly converted into chronic borrowers, research into this has found that there are certain lenders who have incentivized this process of conversion for their staff. They encourage their staff to convert the borrowers into chronic buying and are rewarded for their effort. In other words, these companies have a carefully planned agenda behind putting vulnerable populations into the cycle of poverty.

The reason they came into existence, which was primarily to secure people in the case of an emergency and especially those people who couldn’t afford long term loans is slowly fading away giving rise to a system which can create a serious financial crisis, if not regulated completely. This is because of some of the reasons:

·         Many people are not using these services as emergency money but as an additional source of income. There have been numerous surveys done in the past which has shown that only about 16% of the total population of borrowers is using this money in the case of emergencies.

·         Their age limit is also facing serious flack. Even though only an 18 year old can borrow money, all 18 year olds are not financially responsible and there needs to be a more thorough check done in this regard. These lending agencies before lending money to this particular age group needs to know if they have the ability to pay back the money on time.

·         Even though as per the lending norms, these lending agencies need to lend money only after a thorough background check of the individual, a majority of them are functioning without doing any kind of check.

This situation can only change when the governments in question and the regulatory bodies realize how dependent the population has become on these payday loans.  Direct lenders of payday loans have been having a field day every day since 2008, since there has been no concerted effort in trying to push the use of other alternative sources of credit. This has led to major conflicts within the existing borrower population, as many of them have complained of being emotionally and physically harassed while repayment is usually done. There has been no effort on the part of the lenders to understand the need for bringing people above the cycle of poverty. Instead they have focused only on their profits which have led to the industry being dependent on the people’s dependence. This relationship of dependence is what has caused this serious upturn in the financial world, where we can now see people rising to the occasion and doing something about these payday loans. However the message is loud and clear: Maybe it is a little too late.