Comparison P2p Vs. Payday Loans (Paul)
Comparison p2p vs payday loans (Paul)
Payday are usually called “one of the most expensive forms of credit in the world” (Skiba and Tobacman, 2008). A typical two-week payday loan costs 15EUR per 100EUR borrowed—a 391.07% annual percentage rate.
Many people call consider taking these loans as getting into a “debt trap”. From the other side, industry representatives claim that its rapid growth is explained by a great value of the services in helping the clients to improve their welfare.
Usual bank loans aim to help people buy products they would be able to buy later and the products they can afford. Borrowers reasoning is simple – improve their welfare faster. However, despite payday loan companies are using the same message in order to reach …show more content…
According to Bondora (https://www.bondora.com/en/invest/statistics), approximately 30% of borrowers use peer-to-peer lending for loan consolidation. It means that Bondora’s customers are not able to repay their current credits and majority of cases – payday loans.
Some people just do not trust banks and prefer to use alternative sources of financing. (http://money.cnn.com/2012/09/12/pf/fdic-bank-accounts/)
Many individual lenders prefer to have more information about who is receiving their money and why borrowers need it. Some individual lenders believe that this approach help in minimizing risk and giving better understanding of a risk of default of borrower.
Downsides of P2P lending
Credit history requirements are higher than for payday loans.
Loans are mostly not insured and that increase risks for lenders.
Borrowers need to reveal a lot of personal information such as credit history that becomes publicly available.
Since the industry is quite young, it is almost unregulated by the governments. That is why probability of market collapse is higher than in the banking
Payday are usually called “one of the most expensive forms of credit in the world” (Skiba and Tobacman, 2008). A typical two-week payday loan costs 15EUR per 100EUR borrowed—a 391.07% annual percentage rate.
Many people call consider taking these loans as getting into a “debt trap”. From the other side, industry representatives claim that its rapid growth is explained by a great value of the services in helping the clients to improve their welfare.
Usual bank loans aim to help people buy products they would be able to buy later and the products they can afford. Borrowers reasoning is simple – improve their welfare faster. However, despite payday loan companies are using the same message in order to reach …show more content…
According to Bondora (https://www.bondora.com/en/invest/statistics), approximately 30% of borrowers use peer-to-peer lending for loan consolidation. It means that Bondora’s customers are not able to repay their current credits and majority of cases – payday loans.
Some people just do not trust banks and prefer to use alternative sources of financing. (http://money.cnn.com/2012/09/12/pf/fdic-bank-accounts/)
Many individual lenders prefer to have more information about who is receiving their money and why borrowers need it. Some individual lenders believe that this approach help in minimizing risk and giving better understanding of a risk of default of borrower.
Downsides of P2P lending
Credit history requirements are higher than for payday loans.
Loans are mostly not insured and that increase risks for lenders.
Borrowers need to reveal a lot of personal information such as credit history that becomes publicly available.
Since the industry is quite young, it is almost unregulated by the governments. That is why probability of market collapse is higher than in the banking