Payday Loan Business
In a world where everything is done in a much faster rate than they were used to, it is quite difficult to set up a business. Especially that it’s difficult to think of a product or service that is new, and where you will have a steady market for.
In the financial industry, the market seems to be saturated with the number of banks already playing in the market place. There are all sorts of financial institutions set up and there just seems to be no more room for anything else. Considering the last financial crisis, the outlook for setting up a business becomes bleaker. But, if you search the internet, you will notice how it seems that one is continuing to thrive and new players are still joining in.
This is the payday loan business. It works like a charm because of the idea behind it. There would always be somebody who would need fast reliable cash at some low points in their lives, until they become fully financially stable. Then there would be other people who would be needing cash, especially those who just got out of college or are still in college.
Sometimes, it’s really difficult to cope especially when there are unplanned expenses that need to be paid off and your next salary is just too far for you to wait. This is where the whole concept of payday loan business was built upon. It makes a lot of sense because there is a steady source of clients.
Now, you might think how a payday loan business would be lucrative enough to attract players in the market place. The answer is with the interest rates. They charge a considerably higher interest rate if you compute the nominal fiancé charge that they give, and translate it into an annual basis. It could be a hundred times higher than the normal interest rate.
The next question then would be why would anybody apply for a loan that charges exuberant interest rates? The answer is because you are paying the interest not only for the amount that you borrowed, but also for the convenience of application, fast releasing of cash, and the risk that they took for taking you up with the loan.
There is much debate about this. Some countries have set up a maximum limit that a payday loan business can charge its clients. Still, the maximum is still considerably high. But no matter what happens, clients still continue to subscribe to get fast cash, because for some, even with the high interest rate, it is still the best option for them. Because of this fact, a payday loan business is still considered to be a good investment if you are thinking of setting up a company.
If you are to question the morality, it could be argued that no matter if you charge a high interest, the fact that you have clients’ means that they need the money so bad and no other institution would loan to them. In the end, it is still service to them.