Payday Loan Direct Lender Revenue Is Not So Grand After All
Do you think that a fast payday loan direct lender service earns large revenue from small short-term loans? The industry is often fingered as a booming business feeding off the perils of those less fortunate. Direct lenders cannot deny all accusations as a whole as they understand quite well how the practices of predatory lenders have made a name for the industry. The good news for borrowers is that there are many safe payday loan lenders not looking to eat their income for dinner.
With the postal service losing revenue from mailing charges, are they looking to move into the payday loan business out of hope to make up the difference? There may be quite a few lenders watching to see how their story will unfold. With short-term loan lending experience, responsible lenders can tell you that the industry as a whole does not earn large profits. How much money can you earn off of a $300 loan? In the finance world, a $75 finance charge is peanuts.
Like any other business, payday loan companies have overhead costs. These small fees must add up to cover building costs, employee salaries, benefits, taxes with some left over to cover losses. As there are borrowers who take their loan obligations seriously and do pay off their debt, there are others who don't. There is bad debt which must be written off from those borrowers did not pay the loan back. It's unfortunate to think that the behavior of some customers would maintain high interest costs for responsible ones. Direct payday loan lender services small loans with steep interest rates. Credit card companies have been forced to raise limits for more risky customers as well. Someone has to pay for a company's loss.
What does it all boil down to? The USPS may not earn the revenue they had hoped for. On the other hand, with fast cash advances and alternative options for those without bank accounts the postal service may at least make some gains. They will learn that these customers may take 3-5 months to earn them, so they will need to be patient. The fees only become profit once the loan has been collected as well. Getting an interest charge payment cannot be considered profit until it measures above the loan amount. A borrower that takes out a $375 loan and pays $48 in fees over the next five months without returning the principle balance will actually show as a loss in the books. The fees are no way near the amount borrowed. In the meantime, the postal service will have business responsibilities to take care of. Where is the high revenue in that?
The USPS will have to lend to numerous borrowers before they will see any signs of profit. Where will they get their money to loan out? Do they have profits to risk on customers or will they have to borrow from the government or private sector themselves? If the USPS borrows money, they will have interest payments on top of lending costs. It shrinks revenue further.
Yes, it would be nice to have additional options for those who cannot acquire a bank account for whatever reason. It would be nice to have a place to cash a paycheck without large check cashing fees. The post office won't do it for free, but it will cost less. Smaller finance charges will attract new customers. The postal service may find a new niche in the payday lending and check cashing industry. Time will tell if the service charges will support the overhead. How many new headaches will they want to deal with once they are introduced to borrowers that don't find payoffs an obligation to borrowing money? It will be nice to have an additional responsible direct lender to add to the group to help erase reputation woes of the direct payday loan industry.