As you should all be aware, payday loans are very short term loans with high interest rates, and their name originated from paydays, dates when such loans were repaid. Payday loans are in fact worse possible form of lending, if you look at it from borrowers angle due to high interest rate and sometimes unfair conditions of the contract.
Majority of payday loans can be made on sums of money between 100 and 1 000 dollars due to different laws. Terms of repayment period cause APR to go higher as repayment period is set lower. Standard repayment time is 2 weeks, but other terms can be agreed on as well. In a case of 2 week loans a hundred dollars taken will result in between 15 and 30 dollars of interest making APR on that loan between 400 and 800 percent ( on annual level as APR suggests ).
How much Payday loans cost
Payday loans cost a lot more than your usual loans from banks or other lending agencies. For example, 300 dollars taken on from a bank and payday lender, to be returned in one month would yield huge difference in interest rate profit for the issuer of the loan. Bank will have around 14 dollars of profit through interest rate, meaning that they have APR of 57 ( in reality banks would not give such short term loans, and if they give them their APR is a lot smaller than that ). In a case of payday loan the lender would earn 105 dollars meaning that his APR is 425 percent.
One of the advantages of payday loans is the lack of credit check made by lenders. Requirements for payday loans require only a small amount of documents if you compare it to bank loans requirements. Some basic but steady source of income would in many cases be enough to provide you with payday loan. Apart from that a bank account is required, so the lender can deposit the loan somewhere. Application form for a payday loan is quite simple, and you can fill one of those in under 5 minutes.
Payday lending industry
Industry of payday lending is carried by stores that provide payday loans, check cashes and pawn shops and in last ten years by Internet payday lender sites. But even though payday lending industry is big it has decreasing momentum it is carried on since 2006 ( not including online payday loans ). Highest drop rate of payday loans business was seen between 2009 and 2010, where in 2009 there were 20 600 stores that offered payday loans, and at the end of 2010 there were only 19 700 of them. But online payday lending is still as strong as ever, and there is tendency of increase in their lending power. For a period of 2010 payday stores loaned just under 11 billion dollars, while combined with internet payday loans the number went over 40 billion plus 7,4 billion dollars in revenue.
So, there is no evidence of payday lending business losing foothold on the lending market.