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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 is time we found a better solution.
In this blog post, we’ll discuss how tech companies can make payday loans obsolete by using their resources to create a fair and transparent alternative lending system.
What is the predatory loan?
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Payday loans are small, short term moment cash announcementadvances that payday loan companies grant to people who have no money or bad credit.
The payday loan industry is based on the idea of ​​locking borrowers into a cycle of debt.
If someone takes out a payday loan expecting to pay it off with their next paycheck but can’t afford it because they couldn’t find a job during the weeks between jobs , payday lenders will carry over any one month remaining balance owed. date until the day after the borrower’s next payday without interest charges.
This means that if you take out $ 100 and you can only afford to pay off half of it before your next payday, the lender will not charge you anything for what is not repaid.
However, if you don’t make any payments during that month, payday lenders will start charging interest on the total balance of $ 100 ($ 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 low incomes and bad credit.
What can tech companies do about it?
With over 80% market share, Google has the resources to create an alternative loan system for payday loans.
By teaming up with other tech giants like Facebook or Apple who also hold large market share (and users), they could create a lending platform where borrowers could borrow money from their social network. using their future salary as collateral instead of having no savings account that makes them ineligible for payday loans.
This alternative loan system would reduce or even eliminate defaults because it would be backed by the borrower’s future paycheck that he already receives regularly.
In this way, payday loan companies would not need to rely solely on borrowers with no money and bad credit in order to make profits like they are doing now; instead, payday lenders will continue to generate income from interest charges while helping people who might not otherwise be able to afford anything other than payday loans to access cash when they need it. really needed.
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 the power 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 the opportunity to work with other major players to provide borrowers with a fairer and more transparent solution than payday loans currently are.
The payday industry has been around for decades and some payday loan companies offer low interest rates with minimal fees.
Green day online is a payday loan company that also offers payday loan borrowers an easy way to apply online through their website.
This service is available 24 hours a day, 365 days a 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 teaming up with other tech giants and creating a lending platform where borrowers could borrow money from their social network.
With over 80% market share, Google has the resources to create an alternative loan system for payday loans.
By teaming up with other tech giants like Facebook or Apple who also hold large market share (and users), they could create a lending platform where borrowers could borrow money from their social network. using their future salary as collateral instead of having no savings account that makes them ineligible for payday loans.
Provide responsible and low-cost access to capital
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Provide low-cost and responsible access to capital.
With over 80% market share, Google has the resources to create an alternative loan system for payday loans.
By teaming up with other tech giants like Facebook or Apple who also hold large market share (and users), they could create a lending platform where borrowers could borrow money from their social network. using their future salary as collateral instead of having no savings account that makes them ineligible for payday loans.
Encourage policies
Along with collaborations and tools that can help individuals avoid the shady lending industry, tech companies – especially fintech firms – should encourage policies aimed at dismantling the business model used by the industry.
A national credit limit on interest rates that makes it illegal for lenders to charge more than the fixed amount is an essential first step.
States like Nebraska, as well as Illinois, had already passed interest rate caps, but relying on state government legislation is a slow and ineffective solution.
Tech companies should use their platforms to promote national regulations and make them part of their own products in order to limit the interest rate they charge.
This will ensure that all Americans are safe from predatory lenders.
Americans still face uncertain economic times as jobs are returning at a slower pace than expected.
The federal stimulus package that helped many households during the pandemic has ended, and lenders who were reluctant to lend may get back on their feet during the outbreak.
Tech companies have unique abilities to weed out predatory payday lenders and help create an efficient financial system for everyone.
Now is the time to use their abilities.
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