Loan credit that is considered subprime is something that will always exist. Subprime means a loan lent to somebody who a first tier loan lender wouldn’t touch due to credit scores. A payday loan falls into that category, as do poor credit loans for a home or an automobile.
Loan credit didn’t always depend on scores
Loan credit, or credit of some sort, has existed for a lot longer than the current system of finance. The promise of a future payday was enough to secure credit for a long time. A promise to repay was all Bank of The US required when offering quick and easy cash loans at the beginning. This had been through the San Francisco fire and 1906 earthquake though. It was not until the last half of the 20th century that credit cards begun to be an option. People needed payday loans before that though.
The large loan sharks
Today, individuals who have stable income and a banking account can get a cash advance if they need one. There is not any danger unless somebody borrowing decides not to pay back the loan lenders. This was very different before the 20th century. If you lived then and needed cash, an underground lender was who you’d go to. They were also called a “salary buyer” by many. The salary buyer would purchase part of the person’s next paycheck which had to go to the lender. However, salary buyers could charge whatever they wanted and extract payment any way they wanted.
Supply and demand need to be valued
Usury rates when up when states passed small loan laws to control the “salary buyers” and other underground lenders. That meant that it had been lawful and safe for people to borrow from then on. Banning pay day loans will keep genuine loan sharks in business. You can read more within the facts and statistics of pay day financial loans report from Personal Money Store.
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