Online lending has been predicted as the up and coming niche market within the payday loan industry. Developing consumer services in the online loan world will most likely require additional regulation in order to serve consumers better.
How do Payday Loans Work?
The fundamentals of a payday loan being with the need, which often is needing money today, but the borrower‘s pay day is a week or two away. Hence, the borrower fills out a check dated for the next immediate pay day and gives it to the lender as collateral. The lender then gives the borrower the requested money, minus the interest fee. Then when the next pay day arrives, the lender cashes the borrowers check or charges additional interest to extend, or “roll over” the loan until the next pay day.
A professional researcher focusing on the principle laws of bankruptcy, commercial and consumer law, has also confirmed online lending is gaining consumer’s and lender’s interest for short-term credit products. Online lending gives online lenders greater ability to reach consumers in need of their services, while for consumers, it provides a wider comparing and shopping experience leading to the best options.
Payday loans are a very profitable, money making industry in the United States and millions of payday borrowers rely on this service. The average payday loan is $306, with an average interest rate of 455 percent, which when looking at a two week pay day period, results in fees of $53.