It was originally thought that payday loans were exclusively the purview of those who wanted some extra shopping money or who could not manage their funds well enough to pay bills any other way, but it is increasingly obvious that more people are using these loans for things they need and not necessarily on a consistent basis.
Research from the Debt Advisory Centre shows that almost half of those who took out a payday loan within the last year did so to pay for an essential expense. That expense ranged from a one-time cost, such as car repair or maintenance to monthly bills and utilities. Most of the respondents for the survey said they only used such loans infrequently, not as a repeated crutch to pay for the same expenses month after month.
That’s a far cry from where the industry was at before, where most of those who use payday loans did so out of necessity month after month or did so as part of frivolous spending. Various consumer agencies and advocacy groups have long told the public that payday loans are not a service that should be used for anything other than temporary debt relief and only used infrequently. Payday loan companies offer customers this same advice.
Payday loans are taken out more often during the holidays or on special occasions, such as birthdays and celebrations. But once again, this is a healthy way to use the services, as such loans are only used on a short-term, one-time basis. This research shows that most people are using payday loans as suggested and not simply relying on them to keep them afloat financially from month to month.
Part of this change likely has to do with a slowly recovering global economy. As wages increase, the price of goods decrease and equilibrium starts to be restored, people are able to save more money and spend less of what they earn. This is leading to smarter spending and better use of payday loans.
These loans can be excellent tools for helping people accomplish things financially that they would not be able to do otherwise, but it is important that consumers understand what the loans entail. It seems that many consumers do, and this is helping both the consumers and the payday loan industry to thrive. It helps the consumers in ways already covered here, but it helps the industry by ensuring it does not require closer scrutiny. New restrictions have already been applied to marketing and lending terms, and the efforts to make the industry a better place seem to have paid off.
The new regulations have also made consumers more aware of what payday loans entail and how to better use them. When consumers start treating payday loans as short-term financial boosts, then they can help make the industry stronger by giving it a better reputation. We are already seeing the effects of this change, and it is only looking better and better for the industry moving forward.