Payday loans
1. What are the dominant economic characteristics affecting the payday lending industry?
Payday lending became relevant because they were marketed to prevent and cover costs from bounced checks and overdraft protection fees, late bill payment penalties and other informal extensions of short term credit.
When events happen in the economy it can impact the demand for consumer loans. For example, generally within the first quarter of the year consumers are receiving their tax returns. If there is a consumer has borrowed a payday advance and they receive a payday loan they are more than likely going to pay off their loan, instead of re-borrowing, because they have more disposable income and no longer needs a payday advance. So that can generate a time period that the payday lending companies can expect to process less loans. There are also times where payday lending companies do more loans. During the holiday season they are expecting to get more customers and are expecting to have more consumers that do loans because they are shopping more and need more money. So these companies have to strategize so they can prepare themselves when there are fewer customers utilizing their services.
Payday lending companies have to consider that they are in competition with other companies. Consumers have the option to go use other products and services from banks and utilizing credit cards to meet their financial needs. So it’s vital that the payday lending companies have a sustainable strategy to continue to gain and retain their customers. That way they remain the most convenient option for the customers.
People in the economy have negative perceptions of how payday lending companies operate. This is looked at as an increasing concern because many people think these companies take advantage of low income people in financial trouble. If the people continued to renew their loans every time they pay them back they will eventually paying more money in fees than they can
Payday lending became relevant because they were marketed to prevent and cover costs from bounced checks and overdraft protection fees, late bill payment penalties and other informal extensions of short term credit.
When events happen in the economy it can impact the demand for consumer loans. For example, generally within the first quarter of the year consumers are receiving their tax returns. If there is a consumer has borrowed a payday advance and they receive a payday loan they are more than likely going to pay off their loan, instead of re-borrowing, because they have more disposable income and no longer needs a payday advance. So that can generate a time period that the payday lending companies can expect to process less loans. There are also times where payday lending companies do more loans. During the holiday season they are expecting to get more customers and are expecting to have more consumers that do loans because they are shopping more and need more money. So these companies have to strategize so they can prepare themselves when there are fewer customers utilizing their services.
Payday lending companies have to consider that they are in competition with other companies. Consumers have the option to go use other products and services from banks and utilizing credit cards to meet their financial needs. So it’s vital that the payday lending companies have a sustainable strategy to continue to gain and retain their customers. That way they remain the most convenient option for the customers.
People in the economy have negative perceptions of how payday lending companies operate. This is looked at as an increasing concern because many people think these companies take advantage of low income people in financial trouble. If the people continued to renew their loans every time they pay them back they will eventually paying more money in fees than they can