History of payday loans

At this point, most everyone who’s in the working and financial world (as in most adults) should have at least heard of payday loans at some point before. But even though most people probably know what they are, or at least have heard of them, the history of payday loans is not widely known.

In this article, we’re going to explain the history behind payday loans. We’ll examine how they first got started and why, and other interesting parts of their history. Keep reading now to learn everything you need to know about the history of payday loans.

How Did They Start?

The start of payday loans came about a little over a hundred years ago, when consumer credit was not a widespread market like it is today. Certain illegal lenders would offer “salary loans” to workers who needed money right away, charging high APR’s on them until they were paid back. And like modern payday loans, which also typically have high APR’s, borrowers were required to repay these loans by the time they got their next paycheck.

Many times, these loans would go unpaid, and borrowers would receive harsh treatment from these illegal lenders. This treatment included things like wage garnishment, harassment or public embarrassment, extortion, and the threat of job loss. As a response, state policymakers made an effort to do away with salary loans and illegal lending.

In the year 1916, the first Uniform Small Loan Law was passed, imposing a monthly APR of up to 3.5% on all small loans under £300. This spurred on the need for licensed lenders to provide small-dollar amount loans like these to the masses, and thus the first payday loans became legal.

Further on down the line, in the mid-1900s, the credit market became too large for individual state policymakers to handle effectively, especially as some lenders grew to operate on a national scale. Because of this, a series of federal laws were passed to regulate various aspects of loans and lending, including small loans like payday loans.

All of these regulations allowed for licensed payday lending stores to grow and expand, offering their services to even more consumers than was previously possible. Over the rest of the century, the payday loan market expanded rapidly until it reached the point that it’s at today.

Payday Loans Today

Payday loans today have been heavily influenced by everything that led up to their inception and institution at the state and federal level. Payday loans have become so widespread that several federally chartered banks and other large financial institutions have begun to offer them as well. It is no longer confined to small payday loan vendors, as more and more large banks are offering them too.

Besides this area of advancement, a number of lenders are offering payday loans online. This makes them more accessible than ever, which has led more and more consumers to take out payday loans in recent years.

(Brand Desk Content)