Payday loans are a popular financial option all over the world. The ability to borrow $ 100- $ 1,000 up to paycheck, already deposited to the bank account within 24 business hours, can help out in a difficult situation, for example, when a car breaks down. What about microfinance lending market development in other countries? This article contains interesting facts about payday loans in the USA, UK and India.
The USA payday lending market
There are about 400 lenders in the United States, of which about 150 are online lending services such as payday loans Omaha Nebraska, installment loans, title, home equity, etc.
Payday lenders and referral services are not eligible to operate in all US states.
Almost all online lending sites have a Spanish-language version. there are many Hispanic clients among the borrowers.
The total cost of the loan depends on the state the borrower lives in. It is calculated individually, according to state law.
On average across the states, the full average cost of a pyday loan is about 600% per annum.
In the event of a loan delinquency, interest is charged at twice the daily interest rate.
The borrower can provide the MFI with remote access to its bank account. When the required amount of money is deposited, the MFI writes off the debt.
The MFI has the right to transfer debt to a collection company in rare cases.
Great Britain payday lending services
There are about 250 registered MFIs in this country, and 50 of them issue loans online – payday, installment, etc.
6 years ago, interest rates were not regulated at all, the annual cost of a loan could reach over 5,000%. In 2012, a law came into force that required MFIs to disclose the full cost of a loan. And since 2015, the maximum rate has been set – 0.8% per day.
The amount of the accrued fines cannot exceed the size of the loan body. So, if the amount of a payday loan was £100, then the total amount to be returned together with fines and penalties should not exceed £200.
In case of delay, the microfinance organization has the right to charge a penalty in the amount of the daily interest rate.
The maximum fine for a late loan is £15.
Debt collection can be handled by collection firms or bailiffs.
The most famous MFI in the UK is Wonga, founded in 2007. It is also popular in South Africa, Poland and Canada.
India – a pioneer in microfinancial services
This is the state in which the first microloans appeared. Bengali economist Muhammad Yunus invented the microfinance system, for which he was awarded the Nobel Prize.
To get a microloan, you must be a member of a self-help group. There are no more than 20 people in one community, mostly women. There are about 1.4 million such groups in India.
The Indian microcredit model is considered the largest microfinance program in the world.
The most common purpose of a loan is to develop agricultural activities. That is why most of the work of microfinance institutions in India is concentrated in rural areas.