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You have probably heard about payday loans before. After all, this is hardly a new term. Indeed, payday loans have ensnared millions of individuals who have poor credit. Unfortunately, this is the bitter pill that comes with the sweetness of lending without credit checks. In fact, many people have fallen prey to the global payday loan industry. Therefore, it is continuously booming.
Perhaps you need access to cash quickly because you need to pay your employees, or an unexpected business expense finds you without a ready source of funds. In this case, perhaps a payday loan would be a good idea for you. However, you should know to be cautious with this type of lending.
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Here we talk about the global payday loan industry and how Australia is one of the best countries ever in consumer protection.
What Are Payday Loans?
A payday loan is a short-term loan that doesn’t need collateral and is characterized by very high interest rates. The lenders of these loans do not have valid trade licenses in most countries, but that doesn’t bar them from lending.
That’s why you find that many states do not permit the operation of payday businesses. However, some countries allow trade, but they do not strictly regulate the processes. But the Australian payday loan market is not comparable to that of other states.
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How Is the Global Payday Loan Industry Faring?
Research shows that as of 2020, the global payday loan industry was worth $32.38 billion. Experts expect that to rise 48.68% by 2030. This translates to a growth rate of 4.2% in 10 years.
A payday loan is one of the most accessible loans in the world. This is because you only need to have a job or a source of income, be older than 18, possess an identification document, and have a checking account. In addition, this type of lending has moved to online sites, making it simple to access fast cash.
The ease of applying and accessing loans makes it possible for the market to grow day and night. However, the high rates and short-term nature make these loans accessible to default. This becomes a huge loss to the lenders, making it tough for them to survive in the market. That’s why some of the lenders become bankrupt before their business picks up.
Because of the rapid growth of the fintech industry, experts expect growth in this market in the future. Technology is in no way going back to analog. And that means that more good things are on the way that helps consumers get fast cash.
However, governments need to do more to rein in payday lending industry with regard to their interest rates and repayment terms. It would be good to make the industry thrive, but that won’t happen fast with the high rates.
How Has Covid-19 Affected the Global Payday Loan Industry?
As we all know, millions of people have lost their jobs since the pandemic started. In addition, we’ve seen thousands of people unable to feed their families anymore due to losing their primary income source.
Because payday loans are available only to people with jobs or sources of income, this translates to fewer borrowers since the number of those with jobs is lower.
Therefore, COVID-19 has slowed down the growth of the payday loan industry in the entire world. For instance, the development of the payday loan industry in California dropped by 40% in 2020 compared to 2019.
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How Does Australia Measure up in the Global Payday Loan Industry?
The Australian payday loan industry seems to be the best in the global economy. Perhaps this is because the Australian government has passed bills protecting its citizens against potential debt traps.
For any payday lender to survive in the industry, the lender must not charge any interest to the borrower. Instead, the government allows them to set no more than 24%. The 20% fee goes to establishment fees, and the 4% is usually a monthly fee.
Therefore, the borrowers are usually sure that the government has their back. However, you can not access a payday loan if you are not an Australian citizen.
The other states that allow payday loans globally do not perfectly protect their borrowers against this predatory lending. That’s why you find that some lenders would, though, to the extent of charging an APR of more than 391% for two weeks.
For instance, some lenders like Quid market loans will set you up with a loan at 1,620% APR. However, lenders in Viva payday loans are fair. So if you apply for guaranteed payday loans no matter what Australia requires on this site, the lenders can let you have the loan at a rate ranging from 5.99% to 35.99%. This is better than other payday loan lenders. However, to get better rates, your credit history should be good.
The global payday loan industry is growing, but that should not push you to take high-interest loans. Instead, only take out loans that you can comfortably repay on time. In addition, remember that the best option to survive the pandemic is more income and not more payday loans.