A payday loan is designed to be a short term loan that is secured by a future paycheck. These types of loans rely on the borrower being able to show proof of employment or other payroll records. However, some companies are now offering wonga online cash loans without having to provide any documentation. Here is what you need to know about the payday loan process.
How They Work
The payday loan process works by a lender providing a short term loan to a borrower that is to be repaid quickly. The typical loan term is one day to one week. To qualify, the borrower typically only has to provide a paycheck stub.
If you want to take out a loan, you simply need to go to a payday lender. The lender will typically ask for a postdated check in the amount of the loan, plus interest and fees. On the date the loan is due, the borrower is supposed to return to the lender and repay the loan in person. If the borrower doesn’t, the lender may cash the check.
However, many lenders are now moving online and requiring less documentation. If documentation is required, it can typically be provided by email, scan, or fax. This allows borrowers to request a loan in the privacy of their own homes. Once the loan is approved, the money is direct deposited into the borrower’s account. And when the loan is due to be repaid, it can be electronically withdrawn.
Who Is Getting Them?
People of all income levels and histories! In fact, there was a recent article by The Guardian that highlights how Payday Lenders are Opening Shops on High Streets, highlighting how lenders are moving into more affluent areas and creating better looking store fronts to attract higher end clients that may not have visited them before. This just continues to show that payday loans are becoming more popular to help people get by when needed.
-Matt
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Are they really only helping people to get by? What’s the business model of a payday loan outfit? Simply provide an honorable service for people who need money fast? Doubtful. These business are not sustainable by the assumption that 100% of the people who take out the loans pay them back on time. Instead, they are relying on the towering interest rates naive borrowers will be paying when they default. They would factor in collection costs and algorithmically the expected repayment rates for the sub-market where the shops are located. Typically, people who need cash fast are in trouble with their rent or credit cards. Most of these people are from low-income households in low-income areas. Generally, people with low-income levels also have low education levels. This is why there are more payday lenders in lower income areas. It’s also known as loan-sharking. Legitimate? That’s for you to decide. As for payday lenders moving to more affluent areas, sure. They are seeing a rising demand for short term loans, but their rates and fees aren’t going to be the same. Neither are their requirements. Their expected repayment rates are going to be much higher and they will have to off-set that cost with higher fees or interest. Just a thought.