If you have ever heard about small loans and their significant impact on the economy, you must have wondered about the roots of this very industry. Like everything in this world, payday lending activities also have their beginning and it can be traced back as long to the middle of the 1800s. However, what concerns us today is how this industry developed so fast and what it has already achieved all over the world. Therefore, stay tuned for a small history lesson below!
The Making of Cash Advance Industry
One of the primary reasons for the industry’s emergence was a financially difficult situation in the developing economies all over the world. People not only could not take out proper bank loans but also were not able to conduct any business activities without a startup capital which in many cases was ridiculously small. Therefore, once in 1974, an economics professor at the University of Chittagong, Bangladesh, lent $27 to a group of impoverished countrymen.
Later in 1983, another important economics professor, Mr. Yunus set up the Grameen Bank to issue very small loans of up to $15 a time to the poor and uncreditworthy villagers. Since then it has loaned about £3 billion to more than six million of the very poorest in Bangladesh. These people, though, did not only manage to return all the taken out money but also to found own businesses and contribute to the economic growth of the area.
Benefits of Payday Loans
When it comes to the history of payday loans, this industry has been booming throughout the 21st century and remains on a roll. Here is why a typical payday loan satisfies people’s needs better than any other crediting financial instrument:
- flexibility: when compared to the traditional credits, loan ones allow for greater freedom and flexibility when it comes to the repayment conditions as well as the desired amount of money. If the lender agrees, one can take out just the precise amount of money needed up to $500, depending on the regulations of the state where this operation takes place.
- accessibility: short-term loans industry has benefited the most from the digitalization and modern technologies. Today one does not have to go to the bank an stay in endless queues to get a 5-minute consultation on the loan matter. Instead, one simply goes online, finds a suitable lender, and sends a request online. If this is approved, money will reach account within the next 15 minutes.
- short-term commitment: current generations are less likely to sign themselves up for some long-term commitments like a mortgage or car loans. Therefore, an obligation to repay a relatively small amount of money within the next month or 30 calendar days does not seem that intimidating as a long-term loan of hundreds thousand dollars.
Even though it seems that payday loan filed has always been that successful, the reality is a bit different. There were rises and falls throughout the whole period of its existence which went along with their prohibitions and strict regulations. Today, for instance, there is still a number of states in the USA not allowing the use of such a convenient financial instrument. To wrap things up, history of the payday lending began with the need of people who are usually not able to take out credits at the traditional banking institutions.