Payday loan is a type of a small loan up to $1,000 that is given for a period of 2 weeks under high interest. It is a relatively new name for the loan that has been known to people for a pretty long time. In fact, it was known by the simple name of a short term loan and it has a history as old as people have monetary relations.
It is hard to say when the actual rise of payday loans started in the United States but they were first mentioned somehow officially in 1959 when the Senate Bill was passed that allowed people to obtain such small short-term loans in case urgent cash is needed fast. This was also done as a favor to all the customers who were ineligible for regular loans due to different reasons such as bad credit or bankruptcy and so on.
At that time such loans were known as check cashing loans and could be got only in person (online transactions become popular way much later). However, actual payday lending became extremely popular in the 90s. Precisely, it was in July of 1996 when they were legalized by the senate.
- With the advent of Internet payday lending business has flourished even brighter.
Before that check cashing was the only option and this was good enough, indeed. However, this meant that a person had to go to a payday loan store at least to get the money. With the appearance of online companies everything has become much simpler and easier. One can apply for a loan form a comfort of one’s home. Internet access is only required and there is no need to leave the house. This is very convenient and with the cash transferred directly to a person’s bank account, it is pretty understandable why payday loans are so popular.
- Surely, the convenience does not reduce the risks of such lending and no one should underestimate high interest rates.
However, notwithstanding these facts, payday lending in many situations is beneficial and really helpful. A payday loan can be of assistance in an emergency situation; one just should not overestimate their financial repayment potential and not rely on such shoulder all the way too often.