Payday advance industry representatives have recently said that the onus is on the customer to do proper research before committing to a instant cash loan.
Too many borrowers are not taking proper steps to find the best rates they can before taking out short term loans from payday lenders, industry experts say, with a new research study revealing that the majority of borrowers simply select the first lender that accepts their application and will not bother to take the costs of the loan into account.
There is a wide disparity when it comes to the payday lending industry, experts say, in regards to interest rates and loan terms. Major lenders that have been accused of ‘sharp’ practices, such as Wonga.com, sometimes offer rates on their instant cash loans that are as much as 90 per cent higher than other providers.
Not all lenders are legal loan sharks or just out to make a quick buck off their hapless customers, experts say. In an industry where too many lenders charge APR interest rates well above 1000 per cent on their loans, with some lenders charging as much as 3,000 per cent to 4,000 per cent, there are just as many that charge between 400 and 500 per cent instead.
Payday lending does not need government interference to drive down interest rates, industry experts say, instead remarking that a reliance on market forces will accomplish this goal. However, borrowers need to become more discerning when it comes to selecting a lender, shopping around for the best deal instead of simply taking the first choice that is presented to them.
One of the difficulties both borrowers and lenders face is that the visibility of these more affordable loans is often low, as the payday lending industry leaders have massive marketing budgets that dwarf those of smaller, more equitable lenders, sources say.