The Changing Role of the Payday Loan


A payday loan used to principally be thought of as a credit product that was used to make small purchases in-between paydays and as little more. Today, consumers are using them to replace some credit products and to keep themselves afloat when expenses manifest before income is present to deal with them. These loans are readily available both online and from brick and mortar lenders and, when they're used intelligently and skillfully, they can become a valuable financial product that fits neatly within a range of consumer options.

A payday loan has some features which differentiate it from other types of consumer lending. Foremost among these is the fact that the companies that issue these loans don't rely on the typical system of credit scoring. This means that consumers with compromised credit can still avail themselves of these products and reap the benefits they offer. It also means that one need not sweat it out while their credit report is poured over for any and every shortcoming so that they can be offered poorer terms than those with better ratings. These loans, more than anything, are offered on an equal-opportunity basis.

A payday loan is also defined by being a short-term financial arrangement. A borrower need not make sophisticated financial predictions to determine whether or not they'll qualify for the loan. They need simply determine whether or not they can pay back the loan in full on their next paycheck. The lenders take income into consideration and, generally, if an individual is honest and forthright, they don't have to worry about being written into a loan which is more than they can repay. Payday loans are popular for this self-limiting and disciplining feature; a stark contrast with most other forms of lending.

A payday loan does not suffer from being available only at banker's hours. Many of these establishments maintain an online presence that allows borrowers to take out money anytime they like, day or night, and to have that money directly deposited into their bank account. Because the lender's don't depend on credit reporting agencies to, in essence, make their decisions for them as do most other lenders, payday lenders process their own paperwork and work directly with the consumer. This makes the process of borrowing much less stressful and much more straightforward from the consumer's perspective.

Securing a payday loan is a very streamlined process. Because there is usually only a small sum being borrowed, all one need to do is present evidence that they can reasonably expect to receive that sum from pay or other sources of income by the time the loan comes due. Payday loans require a surprisingly small amount of paperwork and, in the vast majority of cases, the paperwork for these loans can be filled out online. There is generally no requirement that an applicant provide hard-copy versions of paperwork via fax machine. As the world has become more electronically based, paper forms and records have become increasingly unnecessary and this has allowed payday lenders to greatly streamline their process.

These payday loan providers offer a product that is more of a replacement for than an improvement over other types of fast credit. While revolving credit, such that obtained through credit cards and store account arrangements, is oftentimes represented as very convenient and easy-to-use, the terms of such accounts are often arcane, littered with fine-print conditions and subject to changes and conditions which are nothing less than arbitrary and not at all linked to the borrower's loyalty or responsibility as a customer. Payday loans offer much better service.

With a payday loan, a consumer is inherently limited to borrowing only that which they can actually afford to repay. Most consumers, especially today, are not seeking to live beyond their means but many, at the same time, are in a recovery phase where meeting the basic necessities is sometimes extremely difficult and occasionally impossible. Instead of dropping such expenses on a credit card, payday loans simply function to advance the cash the consumer needs until their payday rolls around. It's much easier to understand and manage than revolving credit debt and comes on better terms all around.

A payday loan has another huge advantage: when it's gone, it simply disappears. Credit card debt is not only constituted by charges made by the holder, but by fees and penalties that are, essentially, akin to paying for something when one is receiving absolutely nothing of value in return. The only thing payday lenders ask to be paid is the financing fee. This has the element of a more direct transaction and allows the consumer to avoid spending time on the phone trying to figure out exactly what they were billed for and why. Payday lenders are very well positioned to offer something better than credit cards.