Some individuals have unwarranted fears about online lending
Nov 03, 2013 Sean Albert
Though the nation is well on its way to recovery after years of contending with the Great Recession, there are few individuals who would say that the United States is thriving. Sure, this might not be the case in a few months after the winter holidays have passed and consumers pump a lot of cash back into the economy by buying gifts for loved ones, decorations, lots of food and other products to get in the holiday spirit. But for now, the thought of buying enough gifts to put under the tree in less than two months seems foreboding.
A lot of people have financial fears, whether or not they're in a good place fiscally. For some, student loans, car bills, medical expenses, credit card debt and other costs always seem to be hanging over their heads. Many families can deal with this, but if a surprise expense were to emerge, it could pull them into a downfall.
This is where, for many, short term lending comes in. This form of tapping into alternative credit is very lucrative for a number of people across the nation - they can borrow against their upcoming paychecks in order to contend with immediate bills, then pay it back as soon as short term comes around. Done right, this is a responsible and helpful way to access funds, especially when banks and traditional lenders tighten their purse strings.
However, if people believe everything they read in the media, this industry is scary, harmful, predatory and full of sharks. Nothing could be further from the truth - these companies are made up of individuals trying to put food on their tables too and help their fellow man. But, if individuals go by what they read, even if they're in dire straits, they might not seek out the help they so desperately need from the companies that can give it to them.
It might help if consumers identify the fears they might hold because of sometimes shoddy media coverage and realize that they're unfounded.
Worries about paying the lender back
According to US News, people should be worried about various elements that accompany paying back the loan. For instance, the news source suggested that some lenders have debited the one-time payment more than once by accident, while other have caused a lot of issued taking the money out of the borrower-designated account when there have been insufficient funds.
In almost all cases, these claims are preposterous. First, the client is told exactly what is going to happen when the repayment is scheduled to be obtained. The borrower then gives bank account information so the debit can be taken out of the right account. If there are insufficient funds, that's certainly not the lender's fault. Moreover, multiple debits might happen by accident, but that's exceedingly rare, and many, if not most, companies would be willing to play ball and take care of whatever fees they inadvertently caused.
Borrowers scared of fees
According to KSHB-TV, Missouri native Dana Ratcliff had a bad experience with a short term lender who automatically extended her loan before she had the chance to repay, requiring her to contend with more interest than she'd intended.
The fact is that this could be a possibility, depending on the terms of the loan, but because company representatives re well-versed with the regulations, it might be worth if for borrowers to ask an employee to explain the details so everyone's on the same page. That said, this, again, is a rare case.
However, it's not very common that the media picks up on one of thousands of stories of happy borrowers who used the funds to regain their footing.
Is that fear displaced?
Another thing to consider - is it that individuals are scared about taking on more debt by opening another line of credit with short term lenders, or are there other worries that plague their minds? For instance, a number of individuals might be scared to take out small dollar loans because they're afraid they'll find themselves at the center of a national controversy and their actions questioned as potentially illegal.
This was the case at the end of the summer in New York, after all. State Superintendent of Financial Services Benjamin Lawsky hurled the first stone in a war against the lending industry when he sent an unprompted cease and desist letter to 36 companies he thought were operating illegally by offering residents loans online. He figured this was the case, as the state has laws on the books banning storefront lenders, which is a questionable assumption to begin with. However, of that group, 15 businesses were run by individuals on Native American reservations - meaning that they don't have to abide by state laws, so Lawsky had no authority.
Nonetheless, this launched the companies and borrowers alike into the national spotlight, as Empire State lawmakers continued their witch hunt.
This could signal the possibility of people worrying that their names and faces will be splattered all over the national news if other leaders take a page out of Lawsky's book and begin wrongly suggesting that consumers are doing something wrong.