Online payday loan lenders carry substantial risk for their default rate of interest, and considerably, lower rates than that of the bank rates. According to the commerce, the study made on the payday lenders, the default cost made by them upon their customers or the borrowers is around, the quarter of their annual revenue.
Payday lenders follow a basic loan process, which involves lending for short tern unsecured loan, and ask only for basic information from the applicant. Such short term loans are to be paid at the borrower’s next payday, which is why the pay lender and the loan are seen as high risk. Typically some verification employment and income is involved, which may be via bank statement, but some money lenders may even omit this. Individual companies and franchisees have their own underwriting criteria.
An payday loan lender follows a traditional retail loaning model, where a borrower visits a payday lending store to secure a small cash loan, with payment being deducted from the borrower’s next pay check. The borrower most likely will need to give the lender their bank account information so the payment can be withdrawn on the borrower’s next payday.
An online payday loan lender on loan maturity dates wait for the borrower to return the principle amount in with their next paycheck and if the borrower fails to do so, then the lender has the right to continue to try and withdraw repayment from the bank as soon as the money is available. Yes, there is a risk for borrowing from a payday lender but the consumer shouldn’t fail to repay the amount in full on the agreed date or on the next payday. If the borrower is not able to repay in full with their next paycheck, an online payday lender will work to find a repayment plan or extension with fees being attached to the original loan amount.
One more recent innovation of online payday lenders and payday loans is that the consumer can do everything online with nothing to mail through the post office. A banks statement can be faxed, sent via email or even on a smartphone. On completion of submitting documents and verification of employment, income, and direct deposit, the money is then transferred by direct deposit into the borrowers bank account within 24 hours and the loan repayment or the finance charge is again electronically withdrawn on the borrowers next payday.
