Today, many lending operators specializing in loans are promoting an equally complex and burdensome form of credit. It is an online installment loan with a much longer maturity, but at the same time with high, sometimes triple-digit interest rates. While payday loans are aimed at a poor target audience, the new form of loans is aimed at working-class Americans who are facing stagnant wages and late utility bills that have been accumulating since the Great Depression.
In just 5 years, online loans have transformed from a relatively niche supply into a thriving industry. Now, according to TransUnion, the debt of non-first-class borrowers totals about $ 50 billion. In the process, the landscape of access to credit for a significant part of the country’s population is being transformed. Moreover, the industry participants managed to achieve all this without a tough reaction from regulators, unlike the microcredit segment.
The evolution of payday lending options in Nashville, US
For many families, who face rising costs and stagnating wages, this form of payday lending is a way out. According to the US Census Bureau, over the past 10 years, the average household income has increased by about 15%, to $ 46,000. And this is not only below the 20% increase recorded across a wide range of products. Key costs, which play the most important role in the budgets of the middle class, have increased on a much larger scale: house prices increased by 26%, medical care has risen by 33%, and education has risen by as much as 45%.
To survive in these conditions, the Americans moved in the direction of payday loans Nashville. Unsecured private loans, including home purchases, cars, use of credit cards, and student loans have all grown. Many payday loan lenders, constrained by regulatory restrictions and accusations of predatory lending, saw the growing demand for loans from the middle class as an opportunity for a resurgence. Many citizens of Nashville issue payday loans to cover some urgent expenses.
Payday loan options
And then there appeared online payday loans aimed at a fast-growing population with limited access to traditional bank lending. Ranging from $ 100 to $ 2,500, they quickly gained such popularity that many alternative loan providers soon began to receive most of their profits.
But these changes have had serious consequences for borrowers. By changing the debt repayment system, payday loan operators were able to partially bypass the regulatory barriers aimed at preventing excessive debt burden of the population with exorbitant fees.
While loans are usually repaid in a lump sum over several weeks, the terms for repayment of loans in installments vary from 4 to 60 months, which contributes to the accumulation of larger debts by individuals.
In states such as California and Virginia, restrictions pegged to interest rates a few years ago were intended to protect borrowers, only for payday loans up to $ 2,500.
The growing popularity of online loans, coupled with improved opportunities for improving big data for better customer scrutiny, have helped improve the position of many online lenders. Earlier this year, the Trump administration decided to postpone and possibly ease planned loan restrictions announced in 2016, which also improved the industry’s outlook.
The lion’s share of the growth in this segment is due to the middle class. About 45% of borrowers last year brought in annual income in excess of $ 400,000, based on an analysis of more than 350 million consumer loan applications and 25 million loans issued during this period. 15% of borrowers have income ranging from $50,000 to $60,000, and 13% have more than $60,000.