History of Payday Loans in the US
The market of microfinance organizations is actively developing in almost all corners of the world. Probably, the rapid growth rates of this segment are associated with the high demand for the purchase of payday loans before paychecks from the population. But in order to compete with traditional banks, MFIs have to be as efficient as possible. Most companies are actively introducing new technologies, including algorithms for using payday loans.
Earlier, in the financial sector, the countries of Europe were in the lead, systematically developing their banking services for several centuries. Now the rapid development of the Internet and the market of mobile gadgets has led to the constant use of payday loans online. At present, the situation in the United States has significantly changed for the better, although trends such as the resolution of large banks continue to be alarming. Despite this, the number of people willing to get payday loans fro Directloantransfer is significantly increasing.
In the United States, the population is the tax operator. People are used to counting their money and reporting to the state on their own. In European countries, part of the tax deductions falls on the shoulders of employers, who deduct them from the employee’s salary even before being credited to a bank card.
On the one hand, this option is convenient for the employee using payday loans, but at the same time, many people do not realize their role in the formation of the country’s budget. As a result, they do not closely monitor the efficiency of spending these funds by the state.
On the other hand, some citizens are rather frivolous about their own personal or family budget. Due to the low level of financial culture, people often resort to payday loans. Americans, as a rule, use loans competently, turning them into long-term and extremely profitable loans. Therefore, it is not surprising that payday loans in the United States have gained a positive reputation. The situation is gradually improving thanks to the actions of the regulator in the person of the Central Bank. Among the borrowers, there are more and more of those who use the products of MFOs to fulfill their intended purpose to take out payday loans.
Now the main obstacles to the further development of the market are associated with the actions of the legislative bodies. Quite recently, an initiative group of deputies called for the liquidation of MFOs, deciding that such a measure would reduce the crime rate in the country. In their opinion, the main problem of MFIs is that the presence of large debts pushes citizens to commit offenses in order to pay them off.
The opposite trend was observed in the USA. With the development of the MFO market, the level of offenses associated with robbery and theft decreased.
Thus, the only factor limiting the process of introducing financial technologies is now the administrative barriers associated with the inertia and imperfection of the legislative system. But even this does not prevent the United States from being one of the three leaders in the fintech industry including the constant usage of payday loans.
Despite some differences in legal regulations, the working environment in MFIs in the US and Europe is almost identical. In the West, almost any resident can get a loan. All you need to do is register in the system of a lender who offers payday loans online. Such organizations enjoy increased confidence on the part of creditors and are used to carry out the procedure of issuing funds. The use of this system imposes some restrictions in terms of the ability to repay loans. Domestic borrowers have many ways to pay off their debts. The main thing is to have enough of their own funds.
In America, people who have reached the age of majority can become payday loan borrowers. To get payday loans in some organizations, the client will only need to present a passport. However, due to the age qualification, the involvement of young people under 25 in lending remains low. It is possible to increase the share of young people among borrowers through the development of online services including online commerce.
The appeal of young people to MFOs is mainly due to the availability of convenient solutions in the product lines of microfinance companies. These include virtual credit cards, which are actively used for purchases in online stores; various financial assistants who help plan their expenses online using convenient mobile applications, as well as bonus and savings programs.
Like payroll loans, a US citizen’s income and savings are not counted in credit rating. Credit points are awarded based on the use of other banking products, such as a credit card or mortgage. Monthly phone, utility, or cable TV bills are generally not counted. So just paying your bills on time isn’t enough to build a good credit history. The credit rating of a US payday loan borrower is largely dependent on how many loans they use and how they manage them. Timeliness of payments is also of great importance.