The United Kingdom has created a peer-to-peer version of payday loans online. Here in the United States, people place their money into a savings account earning them a few cents in interest. This U.K. program has people earning up to 12 percent on their money. Some U.K. institutions are allowing people to use their money to fund peer-to-peer payday loan lending practices.
How does peer-to-peer lending work?
People place their money into an account which is used to fund payday loans. Those who borrow the cash will repay their debt a week or two later paying back money borrowed plus double digit interest rates. most of the interest gets relayed back to the original owner of the money, bringing in a much greater earnings on their cash. People with extra cash in the U.K. are being drawn to these smaller financial institutions looking for the most return for their money. Traditional savings accounts are losing the race as more and more people are tired of the banks and financial firms growing richer each year.
Traditional financial institutions will keep your account safe, use your money to fund loans and pay you pennies for the use of your cash. The individual is clearly not reaping any of the rewards brought in from the lending industry.
What are the chances peer-to-peer lending will replace payday loans online in America?
Some may have a moral dilemma with this practice, while others fear the privatization of loans will create a bundle of unprotected loan problems.
As far s the moral dilemma goes, since payday loans online have such a bad reputation of begins predatory lenders, there may be a problem with people not wanting to be involved with such matters. It may not be in the lending practice to feed off the poverty income levels, but without some sort of governed restrictions, irresponsible borrowers will still be looking to obtain loans.
One U.K. lender has implemented a practice to help prevent such matters. The lending service will not provide a loan if there is already one taken out from someplace else. Once the loan is fully paid off, the client is free to apply for another.
Here in the U.S., there are many states working on passing lending laws which will prevent more than two payday loans out at one time. Spotya.com payday loans online already participates in this lending practice by refusing applications to a be a third outstanding loan.
A peer-to-peer lending platform will make the Consumer Financial Protection Bureau’s job difficult to say the least. State and federal funding rules and regulations will not control private funding groups. Consumers will not receive the same backing as with banks. Federally backed banks will protect your money up to $250,000, if a peer-to-peer loan goes bad, there is no protection from the government, the loans are a gamble and there are no returns on a bad gamble.
Some individuals who have the extra cash may enjoy taking the gamble knowing what kind of return will be paid on the risk in the end.
Payday loans online will not be going anywhere in the U.S. The state regulations have improved the lending practices of the companies and the payday loans online practices. With lenders being more responsible with their practices, borrowers will need to follow suit in order to keep these short-term loans both consumer and client friendly.
