There is good news for borrowers who prefer the instant cash provided by payday loans. Small dollar loan products that are designed to protect the consumer are flooding the market. Payday loan alternatives offer borrowers an opportunity to get quick financing while still being able to comfortably pay back the loan. The rates are fixed, the monthly payments are equally divided throughout the loan period in installments, and the higher quality loan terms favor consumer rights. Personal loans with more affordable interest rates and a safer structure of installment payments provide a better chance for consumers to borrow responsibly.
The huge demand for quick access to cash and loans with little income requirements creates a substantial risk for creditors. The best way payday lenders can cover this type of investment is by requiring repayment by the borrower's next paycheck and tacking on a high interest rate and additional fees. The business model is so profitable that payday lenders collect an average of $7 billion annually from fees alone. The idea was if a borrower is willing to accept these terms, then they can have access to this form of instant cash. Before payday loan alternatives, borrowers had few options. These borrowers sometimes know they can't afford to pay back the whole loan in 2 weeks. The high cost credit can turn into more debt than the borrower had originally before getting a payday loan.