Introduction to Payday Lending Business
The payday lending business has been grown rapidly during the last decade because financial needs of people are increasing rapidly and these needs cannot be managed within the income; therefore, people have to borrow money to finance their emergency money needs and emergency needs of money has given popularity to lending business. According to the survey of lending institutions of 2010, it is reported that online lending business was more than $12 billion which is the more than 35% of the whole business market.
The lending business is very profitable because you can earn high profits by issuing small amounts of cash as loans and if you are approving more loan application without any collateral then your profit ratio is higher because unsecured loans are the great source of earning high profits. It is also important to note that you can charge high interest rate for unsecured loans but risk of default will be high in these loans because borrowers have not placed any security; therefore, if borrower will default then lending institution or loan provider has to bear the whole loss.
The government authorities issue license for the payday lending business and you have to fulfil all terms and conditions of the government authorities to start your lending business and if you will not follow the rules and regulation of this business then your licence can be cancelled. You cannot charge high interest rate from the borrowers and interest rate and repayment schedule of the loans will be set with the advice of financial advisors of the government because if there will be no government intervention then loan providers or lending institution will charge high loan rate and interest rate and this government intervention saves you from the economic exploitation.
Online Lending Business is growing rapidly
The payday loans or instant payday loans are the main cause of popularity of the payday lending business because these loan offers provide instant financial assistance to the borrowers; therefore, due to fast processing of loan application lending business has gained popularity in all over the world. The growth rate of lending business is very high as compared to any other financial business and its online services have brought revolution in the history of lending industry and it is reported that online lending industry will capture more than 65% of the whole lending market in 2016.
Although, under payday lending business both secured loans as well as unsecured loans are given according to demands of customers but secured loan offers are more beneficial for the loan providers or lending institutes as compared to unsecured loan offers because in case of any default, they have a right to recapture the property of the borrower. Therefore, they can easily eliminate the risks of financial losses by launching the secured loan offer and normally they demand fixed asset as collateral such as borrowers have to place their house as collateral or security to get the secured loans with long repayment schedule.