Payday loans: increase in the number of borrowers due to the Covid-19 pandemic

Little by little, you come back to reality, go to a café and a hairdresser, a gym or a bookstore. You enjoy the basics even more after loading Covid-19. All of these physical premises are starting to operate online. You now easily read through the gadget, ordering the delivery of information. Just as easily, you can sign up for a cash advance application before payday.

Are Payday Lenders Necessary During a Pandemic?

Credit companies opened at the start of the first lockdown before payday. All at the same time adhere to social distance and receive the desired funds. Some companies charge very high interest rates on loans. Then you don’t have the option to return them. These are not large sums of money, but even a few hundred dollars.

The founder of the nonprofit Prosperity Works, Ona Porter, believes the economic consequences of the epidemic have made matters worse. She adds that many desperate families are starting to borrow at high interest rates.

During the California pandemic, borrowers withdrew 40% of loans, compared to 2019. This is according to the annual report of the state’s consumer credit regulator. The total amount of loans increased from $ 2.82 billion to $ 1.68 billion. Although it is tempting for you to get this loan, there are a lot of rumors going around about them. Consider the main topic.

“It’s a predator industry” – has anything changed?

Payroll companies have a reputation for predatory lending. The pandemic has further aroused suspicion:

In the UK, for example, interest rates have been set at 0.8% of outstanding debt per day and the total loan value at 100%. This fact reflects the trend in the world.
In Germany, the annual rate exceeds market rate.
In France, the credit risk is 1.33 higher than the market rate.
In the UK, a loan of £ 200 of Personal Credit Protection for 13 weeks costs 86%. The biggest credit provider in the UK and Ireland expects prices to rise.

In other words, the unemployment rate and the demand for loans will also increase.

You’ve been laid off en masse or their hours reduced, like in New Mexico. In particular, Guadalupe Credit Union president Winona Nawa said more people would apply for loans.

All to make ends meet. Those in financial difficulty should apply for unemployment insurance benefits. During a pandemic, what everyone needs.

What does the new research on loans show?

The anti-poverty group claims that people use the services of companies on daily debt loans, installment loans. These services charge high fees, interest rates, unlike traditional banks.

“Predatory loan” – this is what specialists call such loan processes. Acorn Canada campaigned to raise awareness.

The result was:

80% of people take out loans for daily expenses. That is, you just don’t have enough money for food, shelter, utilities;
40% of people took out a loan because a regular bank rejected their request;
17% are unable to make payments due to difficulties related to Covid-19.

Statistics show that annual interest rates vary from 25 to almost 400 percent. NSeba Lahai:

“If you take an interest rate of 40%, 50% or 100% on a loan of a few hundred dollars because you have to pay rent, how do you get out of this hole? “

It would appear that the Bank of Canada is meeting the needs of the public. The structure set the rates at the lowest level in history, but people are still not benefiting from them.

Kathleen and nearly $ 5,000

Hamilton resident Kathleen Kennedy borrowed $ 4,300. He issued an interest rate of 50%. And after? “I realized that I had made a very big mistake. The interest rate is outrageous and they are pestering me. I never want to go through this again. “

Commentary from giant company Easy Financial

9 million Canadians use the services of this company. At the same time, these people are unreliable. All because they have low incomes, low credit scores. As a result, traditional banks refuse these users.

The company does not consider itself as a creditor until the date of payment of wages. The company agrees that it is not profitable for consumers to take small services at a price of more than 400% per year. The maximum interest rate is 46%. The company is keen to protect low-income people from the debt cycle.

Is credit available to vulnerable consumers?

Borrowers are more likely to default, so people turn down loans – that’s just one of the arguments. Higher rates usually offset the increased risk of creditors. At the same time, most of the customers with high credit costs have low income. At this point, specialists add poor financial stability, bad credit history. It is difficult for them to cope with financial difficulties. This leads to financial stress. Not even that, it’s a direct path to debt.

Supporters of the same loans view the restrictions as positive. After all, they prevent the exploitation of people and the overdue debt. Due to the pandemic, lenders are worried about unintended consequences. Also, that there is no increase in illegal pawn shops and credit companies.

Conclusion

4 in 10 Americans can’t even cover the cost of emergency medical care. Price $ 400. This is before the pandemic, and it made some serious adjustments to our daily financial lives.

Every country, every small part of the territory of our planet inhabited by people, has felt the consequences. Small and large companies are trying to come together to replenish their resources. It is only difficult to do this if there are not enough funds. Therefore, take a payday loan for a salary – it is a very good idea for you, the main thing for a reliable lender.