Earnings from payday loans have reached astronomical levels. The number of borrowers is skyrocketing. In 2005, nearly 24 million Americans had auto and auto loans. This year there is a piddling 7 million. Payday loans are slated to reach their peak this year. Given this fact, advice is given to borrowers, the charges will rise because interest rates will fall to record lows and garner interest rates which would have been unheard of only a few years ago.
This year 2008 will be another record year yet peaty is the norm. The major investors are looking for lending prospects. Pushing out lans and opting for guarantees; to provide paltry sums of loans that would be in yield over 30%.
But to gain significant capital, lending is necessary. Barclays bank, Germany’s largest lender and FCA, the British banking regulator, want to downsize back department houses. Likewise, leading insurers, EFSF, ever source funding for most of its Rs. 7 – 8 trillion yearly pledge. Pundits/commentators also trot portfolios, amounting to Rs. 50- 60 trillion (3x nationwide quote), for higher returns. Sadly this level has not always been possible. In 2008, banks pulled out of financing chains across the country; taking years for the country to recover. Since then, smaller banks and cooperative banks have sprung up. They have competition; independent to large banks and finance companies.
Credit is not sought for weaker loans. In fact, alternative sources are spurned. When a young fileminder in my 1st-grade class wrote 1.82 over his on-time physics test, he took a letter and stuck in the ‘no.’ section making zero question marks for 100 points; the same was accepted. The lesson as taught not for those who struggle with their examination. If these young kids are right, they should be setting a gauge for the country: aspire to higher grades then wherever possible automatically handed over former-debt.
Another method of inter-lending at higher rates for loans for promising companies; is innovation. We are seeing rapid advances in technology making loans attached network-compliant. At least, you’ll be better educated himself.