If you have ever applied for payday loans online the chances are that you would have applied for finance elsewhere also. Remember the days when applying for a loan used to involve setting up a face to face meeting with your bank manager, providing 6 months worth of payslips and going through a vigorous interview process on what you intend to use your loan for.
The introduction of payday loans in 2007 triggered a huge change in the way customers were able to apply for a loan, with a huge emphasis being placed on a fast online application service. In comparison to the lengthy application process on offer by many of the UK’s leading Banks and Building Societies, payday lenders were now able to guarantee instant decisions and extremely fast cash transfers, something that proved immensely popular among UK consumers.
Other aspects of payday loans that proved to be more appealing to customers were the smaller amounts that were able to be borrowed. Many UK high-street Banks would only offer loan values as little as £1000 in comparison to payday lenders who offer loans as little as £50. Research has shown that up to 40% of people that require financial assistance only need to borrow between £50 – £500 with unexpected outgoings and emergency bills cited as the main reason for borrowing, something that the banks could still not offer to potential customers.
How Payday Loans Compared to Bank Loans
Before the emergence of payday loans, there was no online loan application process. The process to be approved for finance from a Bank could take as long as 2 weeks and involved credit history checks and 6 months of payslips to be supplied to your branch manager. Banks were unable to offer instant decisions and many customers were kept in the dark as to whether or not their application had been accepted.
Payday loans revolutionized the application process by providing an easy online application service that guaranteed to give instant decisions on whether their application was successful. This meant that customers would know if they had been accepted for a loan in a matter of minutes as opposed to days/weeks when applying with a bank.
Smaller Amounts Borrowed
One of the main reasons credited to the growing popularity of payday loans is due to the smaller borrowing amounts that are on offer. Many lenders now offer amounts from as little as £50 with maximum amounts averaging at £2000. The smaller amounts on offer were first choice for many customers needing short term finance. Most Banks only provided £1000 minimum loan terms which were not ideal for many people needing to additional finance, however in some cases this was their only option. Smaller borrowing amounts ensures that customers do not need to borrow larger amounts if it is absolutely not needed.
Shorter Repayment Terms
As opposed to having to borrow a larger amount of money over a longer period of time, many lenders were now offering smaller borrowing amounts over shorter terms to ensure that customers were not unnecessarily borrowing more money for a longer period of time than what they actually needed. Payday loans are intended to be a short term finance solution to cover emergency or unexpected bills until your next pay date. To this day Banks and Building Societies are still unable to compete with the extremely short borrowing terms on offer from many payday lenders.
Faster Cash Transfers
With the fast online application process and instant decisions, most lenders offer same day cash transfers, some in as little as just 15 minutes. Banks and Building Societies had to undergo huge changes to their cash transfer times as the average time take to transfer funds usually took 3-5 working days. Many lenders, particularly those offering a fast online application process also offer same day cash transfers.