Read This Before You Hate Short-Term Loans
One of the biggest causes for big banks hating relatively small-sized short-term loan businesses is mostly because the smaller companies are eating away at their ability to have a monopoly on the market — credit cards.
Plus, the big banks are focused on long-term loans, and short-term loans cut into their turf. If people need a little money for short-term purposes, they’d have to go to big finance to get a long-term loan — but only if short-term loans get outlawed or heavily restricted.
There is some legislation afoot in many states, and countrywide, to limit the APR interest rates allowed by short term lenders to about 36%. Currently, they charge from around 456% to as much as thousands of percent in interest, making their short term loans very lucrative.
If they are capped at 36%, or limited by the amount of money they can loan out, they will not be able to stay in business. This creates a problem for consumers, because financial institutions do not make small, short term loans.
And, the reason they do not currently make these payday style loans is because, with their limited interest fees, the work would not be profitable.
Then again, some people suggest that the big lenders actually are behind the smaller lenders, lending money in lump sums rather than to specific people who want a loan, meaning they are making money on the side.
It seems like no matter what happens, big finance will profit from comsumers needing short term loans. That could be another reason why big finance hates small payday loan companies, in that they need the business, and must deal with the payday loan companies.
If the small payday loan companies are driven out of business by legislation to limit their profitability, the consumers will need to go elsewhere for their short term loans.
They might be able to try out a way to make money online or sell products, but there will soon be legislation outlawing that as well. This is really going to affect lower-class Americans.
Then again, there might be such an outrageous demand for short-term loans that the big banks might actually end up offering them. The chances of this happening are slim.
Big finance hates watching small payday loan companies grow and thrive. In some places, there are more payday loan stores than McDonalds and Starbucks.
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