Payday loans and the short-term loan market are accessed by millions of Americans each year, yet their still remains a stigma over their usage. Indeed, the nature of this type of funding receives a large amount of press and has been known to make the headlines for the wrong reasons. The industry has been attempting to combat negative press and states have enforced more regulation on lenders, allowing the more reputable and professional outfits thrive while the less scrupulous operators are weeded out.
Some of the reasons that consumers have felt embarrassed by asking for payday loans in the past include:
- Feeling ashamed about having a low credit score
- Unable to borrow from banks
- Feeling like they are an unwanted customer of traditional lending institutions
However, with so many Americans now blighted with bad credit, credit scores are not a true indicator of a person’s financial health or social standing. In addition, banks are closing their doors to even those with fair to good credit, meaning that those who previously borrowed from banks with ease face problems and need to look to different sources that are not biased against those with poor credit.
Short-term lending has lost its stigma – here are some reasons why:
Short term lending is in its ascendency
According to several respected financial commentators, the payday loan sector is in its ascendency, both with consumers and fellow industry stalwarts. The American financial sector has woken up to the opportunities presented by this type of lending, with many brokers now diversifying their business areas into the short-term finance sectors and giving more value to the industry as a whole.
Short term lending is legitimate and regulated
Payday loans and cash advances certainly have a place within the finance industry and with 12 million Americans using payday loans each month according to figures from the Pew Charitable Trusts, the stigma is waning as time elapses. Although there used to be a somewhat murky connotation to visiting a dimly lit storefront to borrow a few hundred dollars with a post-dated check, the rise of sleek, professional and confidential online cash advance matching services has taken the payday loan sector out of the shadows and into the legitimate mainstream.
2007 as a game changer for short term lending
The onset of the global financial crisis in 2007 represented a significant shift in public perceptions of payday loans and opened up a new demand for short term lending. As banks made their lending criteria stricter, a lot of businesses and individuals needed to find ways to counterbalance their drying cash flow. Consumers who were loyal and longstanding clientele of banks were suddenly denied credit due to a couple missed payments or a decrease in their earnings. This drove a huge proportion of consumers away from the banks and towards short term lenders out of necessity.
Online options to find and compare payday lenders
There are now many aggregation websites that pre-screen lenders for professionalism and submit applications to a network comprised of many, removing the need for consumers to take their chances with unknown lenders directly. The level of confidentiality and privacy that accompanies online applications to payday lenders is unprecedented, as is the option for no credit check loans. Consumers have realized that short term lending is not a dirty secret; rather, it is a secure, fast and easy way to borrow small dollar loans for a number of days or weeks at a time without adverse effects on their credit scores.
Do you feel that payday loans are becoming a more acceptable way for people to borrow money? Do you think that cash advances get unfairly bad press? Share your comments with our readers!