Do You Like Short Term Loans? Some People HATE Them!
Written by Shaun Connell on Friday, July 31st, 2009 in Self Development.
The main reason why big finance hates small payday loan companies is that they view them has having an unfair advantage in competition because payday loan companies are allowed to charge extremely high APR interest rates.
Of course, one of the obvious reasons for big financial institutions to take on short-term lenders is that of competition. If people get a short-term loan then they won’t get a bigger long-term loan at the big banks — competition.
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.
Of course, big companies have to make more than fifty bucks per loan — the smaller guys don’t. It’s just a question of them squashing small business competition.
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.
Basically, no matter what happens, the big financial companies will be profiting overall, which might be another reason they hate these small loan companies — they need their business, which puts them into a bind.
If the big companies wipe out short-term loan lenders, the consumers are going to put their money in the coffers of the big financial institutions. And that’s what it’s about in the end.
They can go back to pawning items, althouigh there is some legislation of a similar limiting nature going on there also.
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.
One of the obvious conclusions is that the big banks and financial institutions can’t stand the small short term lenders, mostly because they are expanding. That’s inevitable.
