There are some people out there who do not think that payday loans should have a place in our society. Those people might be interested to know that there is a new study in the works to find alternatives to payday loans. This is a program started by the Federal Deposit Insurance Corp (FDIC). You might be wondering why this is important to discuss. Well, there are many people out there who get payday loans every day, so any research on alternatives is very impactful to our financial society. Let’s take some time and go through why there is research and what they might find in regards to this study.
Why the Research?
The obvious part of the research is that it looks to cut out predatory lending. They want to make these loans more profitable so larger financial institutions and commercial banks begin to offer them. This would make it more of an even playing field for those who want to be involved. If larger institutions see that there is a way that these loans can work more successfully, then they might be encouraged enough to take over some control. This would also put an end to things like overwhelming interest rates that people fall victim to.
Emphasis on Stability
It is with that stability in mind that they look to lower the interest. These loans can only be received in amounts up to $2,500. The lowered interest rates must be capped at 36%, because of the new regulations. The interest rate is a key problem, so capping it can control it better. If larger institutions and commercials banks begin to take control of this process then you could also see them become more flexible with the rules. This could also be a benefit that matches up a person with a payday loan that is easier to handle given their situation.
What Have the Results Shown Thus Far?
More than 3,000 of these loans have been released in order to see the early results. While the results have not actually been released yet, the banking institution experts like what they have been seeing. It shows that those with stability have done really well. The reason these institutions were so hesitant about this is because of that stability. The more they see, the more likely this program can go through. This is just another step in the process to find a suitable alternative to a payday loan. One day there will be a major breakthrough.