As you may already know, payday loans are debt traps mainly due to their short term nature and very high interest rates. However, this may not last long due to the advent of financial technology (fintech) companies working with banks.
What is financial technology?
Financial technology is the integration of technology with traditional banks that make their day-to-day transactions easier. Consumers who cannot get credit due to lower credit scores are now better able because fintech is helping them.
In addition, some good apps like Earnin are emerging to help consumers get salary advances. For example, the earnings app gives you what you worked for, whenever you need it.
Fintech is also making sure that consumers can access their banking services from the comfort of their own home using mobile phones. As a result, mobile banking simplifies deposits, withdrawals, transfers, saving and investing money.
So the unemployed have a shoulder to lean on in inventing financial technology. Fintech has introduced digital money like bitcoins and online exchange platforms. As a result, the cryptocurrency business is growing day by day. People have learned the importance of having financial freedom and everyone is working towards that goal.
What are Payday Loans?
Payday loans are the loans that you receive and repay on the next payday. Payday loan repayment terms do not exceed two weeks. In addition, you pay the total loan repayment – loan amount plus interest.
Their main feature is the high interest rates, which start at an APR of 391%. As a result, payday lenders tend to catch those who need easy money but have bad credit ratings.
How Will Financial Technology End Payday Loans?
Now that you know the importance of financial technology and Payday loan online, I’ll take you where the fight is.
1. Lenders of payday loans will not take advantage of those with poor credit ratings
Fintech is focused on helping people with bad credit scores get better business with community banks. Financial technology enables employers with advanced technology to advance their employees.
For the most part, fintech consumers get free loans or a low cost of no more than $ 5. And that’s why payday loan lenders are on the verge of collapse.
2. No more high-interest loans
Payday loans are very expensive in their interest rates. Research shows that people pay more than $ 9 Billions in US payday loan fees. This discovery shows how expensive payday loans are.
However, with the advent of financial technology, payday loans are slowly becoming a thing of the past. Instead, consumers get better deals on emergency cash whenever they need it in the middle of the month.
3. Financial technology has made traditional banks work better
The technology connection to banks not only helps consumers with cheaper loans, but also improves the banks’ customer service.
It’s easy and convenient to get banking services on your mobile phone for free. You don’t have to go to a bank all the time to look for a loan service.
So, the payday lenders have nowhere to hide their lazy businesses for desperate consumers.
4. Financial technology enables consumers to restore their creditworthiness
In light of the coronavirus pandemic, banks understand how their consumers are facing financially tough times. With the help of fintech, banks can grant their consumers credit restructuring loans at very low interest rates.
Payday loan lenders do not help borrowers improve their credit scores. Instead, taking out lots of payday loans will ruin your creditworthiness in the long run.
5. Access to more financial services
With fintech at hand, you can access banking services, loans, and savings and investment services. This feature enables consumers to set and achieve financial goals.
Consumers will focus on just getting credit, but they will also save money, which will allow them to gain financial freedom. In addition, some banks offer automated savings services that are of great help to consumers. And all of this is happening thanks to the development of financial technology.
Payday lenders do not offer any financial services other than providing high interest loans.
The bottom line
Payday loans run the risk of going down in short. Consumers are tired of getting the raw end of the deal. So don’t be surprised if payday lenders leave the money market within ten years.