In the not-too-distant past, the residents of the United Kingdom had a term for the sound of the bustle and commerce in the streets of London: The Hum.
Day and night, the city made a noise, the noise of prosperity and hard work. The Hum wasn’t just one sound. It was the collected sounds of millions of hardworking citizens off about their daily chores with a visible and audible sense of urgency.
London and the UK still hum with commerce, but there are always unexpected roadblocks in the way of a household or small business that require an immediate outlay – ready or not. The need for small amounts of ready cash for loans, with decisions made quickly, conveniently, and without a lot of paperwork has fueled a meteoric rise of what are called Payday Loan lenders.
What Are Payday Loans?
Payday loans are now available in hundreds of small shops nationwide and by application on the Internet. Customers generally borrow around £75 to £750, which can be deposited into their bank accounts in as little as fifteen minutes. Repayment terms range from two to four weeks, about the time until the borrower receives his next “payday.”
While the interest rate for these loans is high in order to cover the high risk of default on short-term unsecured loans, they are an attractive choice for borrowers who need a quick cash infusion unexpectedly. Borrowers can plan on a definite date for repayment using a reliable paycheck. Loans can be rolled over at the end of their term as well.
The Case For Payday Loans
Payday Loans have become a big and prominent industry in the UK very quickly. UK loans like Payday Loans serve a population that is desperately under-served by the traditional banking industry, and it shows. The Guardian reports that the Payday Loan industry is providing their customers in the UK with more than 8 million loans a year and grown from £100m in 2004 to over £2.2bn in 2012
UK loans like Payday Loans aren’t as attractive to consumers who have instant access to credit cards and traditional lenders, but to everyday working people the UK loan industry’s Payday Loan option is invaluable. The figures show that borrowers feel comfortable using Payday Lenders multiple times a year to tide them over during emergencies.
The Backlash Against Payday Loans Falls Flat
Payday loan lenders have picked up some noisy detractors in the press, but correspondents at The Independent have observed that while Payday loans have high interest rates, they’re comparable to fees that big banks charge for overdrafts. The Daily Mail reported that a customer at a traditional bank like Barclays would incur almost exactly the same fee for a £100 overdraft for thirty days that a Payday loan would charge for the same amount and term. Since an overdraft charge is essentially a fee for instantly granting a small, unsecured loan, Payday lenders are already offering loans at regular market rates for the type and amounts of the loans they grant. They’re just calling them by another name.
The household income of two-thirds of Payday loan borrowers is less than £25,000, and government has finally begun to recognize the industry as something that’s filling a real need. The think tank IPPR has proposed a levy on Payday loans to fund a government-run version of Payday lenders to help serve the large amount of borrowers who are still shut out of traditional lending methods. The proposal goes on to suggest that credit unions be set up in Post Offices to handle these loans. It’s a testament to the usefulness of micro-loans offered on short terms that such an expansion would be feasible.
A Return To Normalcy
Back in the days of The Hum, banks were run with the efficiency of the Admiralty. The vision of trim bankers in bespoke suits and Bowlers hurrying back and forth to see about the affairs of their clients were a symbol of fast decisions and quick settlements. Payday Loan outlets connect an eager borrower with an equally matched lender, at rates that both can agree on, spelled out clearly beforehand on terms that work for today’s fast-paced lifestyle. They bring back The Hum