There are many payday loan companies in the United States, and they all have one thing in common: they use predatory tactics to take advantage of people with little money.
The payday loan industry has been around for decades, and it’s time that we find a better solution.
In this blog post, we will discuss how tech companies can make payday loans obsolete by using their resources to create an alternative lending system that is fair and transparent.
What is predatory lending?
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Payday loans are small, short-term instant cash advances that payday loan companies give to people who have no money or bad credit.
The payday loan industry is built on the idea of trapping borrowers into a cycle of debt.
If someone takes out a payday loan expecting to pay it back with their next paycheck but cannot afford to do so because they were unable to find work during the weeks when they are between jobs, then payday lenders will rollover any remaining balance from one month’s due date until the day after the borrower’s next payday without charging interest.
This means that if you take out $100 and can only afford to repay half of it before your next payday, then the lender won’t charge you anything for what isn’t paid back.
However, if you fail to make any payments at all during that month, then payday lenders will start charging interest on the full $100 balance ($15 per $100 borrowed).
This is just one example of how payday loan companies use predatory tactics in order to take advantage of people with little income and bad credit.
What can tech companies do about it?
With over 80% market share, Google has the resources necessary to create an alternative lending system for payday loans.
By partnering with other tech giants like Facebook or Apple who also have large market shares (and users), they could create a lending platform where borrowers would be able to borrow money from their social network by using their future salary as collateral instead of having no savings account which makes them ineligible for payday loans.
This alternative lending system would reduce or even eliminate defaults because it would be backed by the borrower’s future paycheck which they already receive on a regular basis.
This way payday loan companies wouldn’t need to rely solely on borrowers having no money and bad credit in order to make profits as they do now; instead payday lenders will continue making revenue through interest charges while also helping people who otherwise couldn’t afford anything beyond payday loans get access to cash when they really needed it.
What does this mean for tech companies?
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Tech companies could potentially solve the biggest problems facing society today if only we gave them an opportunity to do so.
By collaborating with other major players working towards similar goals, tech entrepreneurs can use their resources and knowledge to create innovative solutions that will help the world become a better place.
In this payday loan example, tech companies have an opportunity to work with other major players in order to provide borrowers with a solution that is fairer and more transparent than payday loans are now.
The payday industry has been around for decades and some payday loans companies offer low-interest rates with minimal fees.
Green Day Online is one payday loan company that also provides a simple way for payday loan borrowers to apply online through their website.
This service is available 24/hrs a day, 365 days per year and there are no hidden fees or surprises when you receive your payday loans.
The benefits of using technology to make payday loans obsolete
Tech companies can make payday loans obsolete by partnering with other tech giants and creating a lending platform where borrowers would be able to borrow money from their social network.
With over 80% market share, Google has the resources necessary to create an alternative lending system for payday loans.
By partnering with other tech giants like Facebook or Apple who also have large market shares (and users), they could create a lending platform where borrowers would be able to borrow money from their social network by using their future salary as collateral instead of having no savings account which makes them ineligible for payday loans.
Provide low-cost, responsible access to capital
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Offer low-cost and responsible access to capital.
With over 80% market share, Google has the resources necessary to create an alternative lending system for payday loans.
By partnering with other tech giants like Facebook or Apple who also have large market shares (and users), they could create a lending platform where borrowers would be able to borrow money from their social network by using their future salary as collateral instead of having no savings account which makes them ineligible for payday loans.
Encourage Policies
Alongside the collaborations and tools that can help individuals avoid the shady lending industry, tech firms — particularly fintech firms — should encourage policies to dismantle the model of business used by the industry.
A nationwide credit limit on interest rates that makes it unlawful that lenders charge more than the set amount is an essential first step.
States like Nebraska, as well as Illinois, had already adopted interest rate caps, but relying on legislation from state governments is a slow and ineffective solution.
Tech companies must use their platforms to promote the national regulations and make it a part of their own products to limit the interest rate they charge.
This will ensure that all Americans are secure from lenders who are predatory.
Americans are still facing uncertain economic times as jobs are returning at a slower pace than anticipated.
The federal stimulus program that helped numerous households during the pandemic ended and lenders that were averse to lending may regain their foothold lost during the epidemic.
Tech companies possess unique capabilities to eliminate payday lenders that are predatory and assist in creating an efficient financial system for all.
This is the time to make use of their capabilities.
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