Payday Loans Today: Why People Choose Them

by Carter Toni

In life, there are such situations when money may be urgently needed, but to contact the bank is to acquire another headache because the conditions for the loan will be beneficial only to the bank, and large interest-only aggravates the whole situation.

Today, a large number of people are not officially employed, so again you can get a refusal from a banking institution because banks do not accept applications from those customers who do not have an income certificate and official employment.

Reasons for Selecting Payday Loans

People are trying to solve all their financial problems despite the complex bureaucratic system of issuing loans in banking organizations. Here, a microcredit organization comes to the rescue, which provides the client with the convenience and mobility of modern financial services. Such services will be available anywhere and at any time convenient for the client; only an Internet connection is required.

“Debts are nowadays like children begot with pleasure, but brought forth in pain.” — Moliere.

Customers of such online services are provided with more loyal conditions than in banks. Services also focus on repaying debt with a single payment from the receipt. Also, MFIs do not pursue customers and do not threaten them, everything is loyal, and it is also possible to extend the loan for the necessary period.

Of course, small underpayments can cause the next loan’s refusal, so it is best to pay money on time and without delay.

Main Reasons

The root cause of applying for payday loans is insufficient financial literacy, unwillingness, and/or inability to plan a personal budget, anticipate the risks of adverse situations, and take measures to resolve them.

People with a high level of social and personal responsibility take care of the well-being of their own and their loved ones and prepare in advance to solve possible problems. They save money by creating a “financial pillow” and issuing credit cards. And when faced with emergencies, they use the “ready” means – their own or borrowed, and on much more favorable terms than are offered in MFIs.

Here are the most popular reasons for taking payday loans at :

  • salary delay;
  • urgently needed money for treatment;
  • home repair or purchase of household appliances;
  • organization of the celebration (weddings, jubilees, and others);
  • money is needed for shopping;
  • for an urgent trip.

There may be a lot of such reasons, and most importantly, each of them still requires a certain amount of money, which may not be at hand.

“Some debts are fun when you are acquiring them, but none are fun when you set about retiring them.” — Ogden Nash.

Pros and Cons of Payday Loans

Advantages that attract borrowers:

  • Minimum requirements for age (43% of millennials use payday loans), employment, customer income, and documents (usually only a passport is required).
  • High speed of receiving funds, especially when making a loan online.

Disadvantages of payday loans include high rates, which reach several hundred percent on an annual basis.

MFIs also issue small amounts. Therefore, microcredit companies are contracted mainly by those who:

  • there was an urgent need for a relatively small amount of borrowed funds;
  • there is no possibility (or desire) for various reasons to borrow money from other sources quickly;
  • there is confidence in the return of debt in a short time (in a few days, at most within a month) to avoid huge overpayments.

Who Turns to MFIs?

People of different ages and social categories apply for payday loans: from students to pensioners, from the unemployed to employees of organizations with a high salary level. According to the results of research on the MFI market, among those who take payday loans, the following prevail:

  • people of younger age;
  • unmarried persons;
  • without children;
  • those who do not have higher education;
  • employed in trade and services, without formal employment;
  • those with middle and lower income.

The payday loans market, like any other, functions and develops under the influence of supply and demand. An acute struggle for each borrower leads to an increase in the attractiveness of the conditions on which they are issued.

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