People - not American, not Europeans, not Asians - but all people fall on financial hard times from time-to-time.
In the past, those with immediate, unexpected financial issues had limited options in securing a short-term loan. They either had to turn to friends and family, sell off personal assets or fight with their bank to get a quick personal loan.
Friends and family no longer have the resources to help. Personal asset values have declined and thus provide no value. And, banks just are not making loans to anyone - let alone unsecured personal loans - especially for those that have minor credit issues or don't have huge incomes.
The end result, there is a huge gap in the personal loan markets - in this country and worldwide.
To fill this gap, alternative sources of cash loans have cropped up and are now becoming quite the mainstream way to overcome short-term financial issues.
It's almost like tattoos. A decade ago, very few people had them or wanted them. Today, you are almost considered odd or outside the norm if you don't have one.
According to responsiblelending.org, some 12 million people in the U.S. use payday loans each and every year. Further, according to Consumer Focus; the number of people using payday loans [in the U.K.] has increased fourfold since 2006 to 1.2 million people, borrowing a combined £1.2 billion (nearly $2 billion U.S.). So, it is not just in America.
But, why are so many people turning to these short-term personal cash advances?
Here are three chief reasons that alternative money sources, like Payday loans, are becoming the new norm.
1) As stated, banks aren't lending. They claim far too many un-creditworthy borrowers or lack of repayment ability or declining collateral values. All things that banks and similar financial lenders state that make lending too risky.
(Many think that banks are just looking out for themselves and have no concern for the financial needs of their customers or communities).
So, people turn to payday lenders where there is no concern about credit scores and since these loans are unsecured, there is no worry about collateral values. If you can simply make the payment on your next pay period, the loan is approved, you get funded and satisfy your current financial needs.
2) Time. Banks, even if you can get approved, take way too much time to fund the loan.
Most of the time, when people confront a financial dilemma, its is usually an immediate financial need - meaning that they need the money yesterday - to avoid overdraft or return check fees, to keep their utilities turned on or to make a purchase during a sale or discount period. But, banks can take days, weeks and even months to approve and fund personal loans.
Even relatively new personal, short-term loan options like peer-to-peer loans take time to get enough peers to come together and fund the loan.
And, as people are now showing, that is time they just can't afford to waste.
Today, a individual borrower can be approved and have their payday loan funded in a matter of hours - usually 24 hours or less (less if applied for during normal business hours) - enough time to take care of whatever issues they are currently facing.
Plus, having the convenience of applying for these personal loans online allows these potential borrowers to apply at anything from anywhere - thus they don't have to try to get out of work just to make banker's hours - usually between 9:00 am and 3:00 pm. They can apply when they get home and find the time to do so - on their schedule.
Unemployment worldwide is at unbelievable levels - especially for those under the age of 40. But, an even more pressing problem is underemployment.
It takes a certain level of income today just to live. You have to pay rent, have a vehicle to get back and forth to work, utilizes prices are increasing and food costs are going through the roof. Now, paying those standard living expenses is not such a bad thing if you are employed in the job of your choice.
However, nearly twice those that are unemployed are underemployed. Meaning that they still face those high standard of living costs yet do not earn the income needed to cover them.
Think about the recent college graduate that not only has to repay his student loans but has to live somewhere as well - all while earning minimum wage. Not likely to happen and not a good situation when an expected financial event crops up.
Or, the 35 year who was earning $35,000 a year over the last ten years and has a mortgage payment, two car payments, high utilities bills and still has to feed a family of four plus (pet included) - not to mention the thought of future college tuition bills for the children that need to be saved for right now.
When this person gets laid off or downsized and can only find a job that pays half of their previous income, trying to deal with unexpected financial issues can be more hassle then they are worth.
Thus, these individuals have no choice but to turn to short-term payday loans just to get by. Banks won't help them - not enough income or minor credit issues due to that lower income and friends and family can no longer help as they are more likely then not in the very same situation.
So, why are so many people now turning to short-term cash loans or payday loans?
Because they have no other choice and payday loans are better then the alternatives like not having heat in the winter or not being able to get your car repaired or not getting proper medical care.
Don't believe me. Then ask the nearly 25 million people worldwide that use payday loans each and everyday to their own satisfaction.