Why are payday loans so popular?

Payday Loans have become popular in recent years for a variety of reasons. Some are related to what these products have to offer, whereas others are because of conditions set by the wider borrowing market. We will look at the main reasons payday loans are popular below: 

Quick cash boost

Rather than personal loans or credit cards, payday loans can often be agreed with funds released on the same day, or within 24 hours of your application. Where time is of the essence this characteristic is one that is very appealing to people who need the boost now, not in a fortnight. 

No Lengthy contract and agreement

Payday Loans are also by and large designed to last no longer than 30 days. This is because, as the product suggests in the name alone, they are designed only to provide a short cash boost to your next payday, not a long term credit solution. The short duration is another appealing characteristic of the payday loan, as they do not require you to commit to a lengthy credit agreement for what is only a temporary credit need.

Alternative to traditional loans

Many find that in order to get the best rates on a personal loan that you need to take out large amounts for the low interest rates. The smaller the personal loan, the greater the interest rates and these can be quite significant if you have a less than perfect credit rating. While the interest rates are generally less than those for a payday loan, as the agreement lasts a lot longer, a personal loan will more often than not cost you more actual money in the long run. If your need is temporary and immediate, a payday loan can be a viable and favourable alternative.

Recession

When recession hit, many banks and lenders tightened their pockets. Many that were able to get credit before, found themselves in a position where lenders were not willing to take the risk anymore and they could not obtain credit. The very people that required credit the most were left in limbo and it was products like payday loans that offered an alternative, fast and flexible source of credit. Payday Loans in this sense are popular because they were there when people needed them the most, when the banks had abandoned them.

There are other reasons for the growing popularity, but these by and large are the most prominent and widely acknowledged.

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