Putting the term ‘Payday Loans’ in simpler words, these are short term cash advances that people borrow from lenders to get through the month until they receive their salary. Therefore, lenders lend out a small principal amount at a high interest rate.
Interestingly, this mode of lending and borrowing money has garnered a lot of popularity, and the demand does not appear to be waning any time soon.
This is why many Banks have also introduced Payday loans as one of their banking products with lucrative incentives and policies. Retail banks now believe that they can make money from the growing interest in Payday loans.
Benefits of Payday Loans
These loans are a quick solution if you are facing a cash crunch and are looking to resolve the problem immediately. You can take the loan and have to pay back after you receive your next paycheck.
Payday loans are the fastest way out, especially in cases of medical emergencies. Not everybody has insurance; hence some quick and simple short term financing would be of great help. For example, a payday loan in Virginia, Washington, is accepted and processed in one business day.
A regular lender usually needs you to provide a reason, collateral, and paperwork for taking out the loan. Sometimes, the reason might not be accepted, and sometimes it could be embarrassing. Other times, you may not have time for all the procedures and paperwork.
This is why payday loans are so convenient. You do not need to have an authentic reason all the time. You could simply be craving a tattoo or in the mood to throw a fun party to your friends by the pool. You can spend the money however you wish to.
Apart from a credit check, not many things are required to get a payday loan. All you would need to bring is a proof of your workplace, i.e., a guarantee to assure the lender of your employment. You don’t even need credit counseling.
Obtaining a Payday Loan
Payday loans used to be the typical characteristic of a few lenders, small credit merchants and credible online lenders who allow credit applications and approvals on Internet sites (visit PaydayMe).
The borrower has to provide his paystubs from his employer to show the current level of income. Other factors that sometimes influence the terms of the loans are the borrower’s credit score and credit history at the time of application.
Unconventional Yet Attractive Banking Policies
It is surprising as to why banks are looking to grab a piece of these unconventional banking policies. The simple reason could be the fact that online lenders and local payday loan companies are thriving,
The ever-increasing demand for short term loans has not given the retail banks a single reason to believe that their market would dry up soon.
Retail banks have confidence in their ability to make money, considering that they have an advantage over the other lenders. Banks already have the market capitalization and the essential infrastructure that yield decent profits while offering loans.
They believe that they have an edge over other competitors like online lenders and payday loan companies.
Definitely Banking Products
These short term loans are definitely banking products. Barring the perception of the customer, everything else about the new short term payday bank loans is the same.
Amounts of loan money are smaller (Usually between $100 and $1000), and repayment periods are shorter when compared to the traditional loans. The interest rates, however, are much higher than those provided on the regular loans.
For example, a new loan scheme announced by the US Bank offers short term loans only to its current bank account holder. Anyone applying for such a loan must hitherto have an account with the bank.
The loan scheme also comes with borrower friendly features like automatic repayment to enable money withdrawals from the already existing customer’s account.
This ensures the customer of security and ease of transfer. As the thinking goes, the customer
money withdrawals from the already existing customer’s account.
This ensures the customer of security and ease of transfer. As the thinking goes, the customer had already placed enough trust in the bank when he opened the account.
This trust may now translate into willingness to go ahead with the same bank for the short term loan offer instead of going elsewhere.