The COVID-19 coronavirus has wreaked havoc on our economy. According to the IMF, it could cause financial instability around the entire world, and create an economic depression and financial crisis worse than even the 2007-08 financial crisis.
And in this time of economic insecurity and instability, more American households than ever are turning to payday loans. Both payday lenders and title lenders anticipate more applications as layoffs due to COVID-19 coronavirus continue to affect Americans.
So why are American households turning to payday loans to get the cash they need during this crisis? Let’s find out.
Layoffs & Furloughs Are Affecting Millions of Households
Total U.S. unemployment claims have hit more than 20 million, as of publication time, officially passing the record set during the Great Depression. Joblessness claims have hit a few industries particularly hard.
Service industry employees working in restaurants, hospitality, transportation and in non-essential retail stores have all been affected, and many workers in these jobs already suffered from economic instability. Many people with low incomes have been left scrambling to find cash to pay their bills.
Government Aid Is Slow or Insufficient
Recently, Americans began receiving $1,200 stimulus checks from the IRS – though millions of people are being paid late due to system glitches. But considering that the average rent in the USA is more than $1,000, this money won’t go far for households that are struggling with joblessness.
Unemployment is also difficult to get for many Americans due to the millions of people filing, and many gig workers and other low-income individuals may not qualify. Because of this, many households are forced to turn to payday loans to get the cash they need.
Payday Loans Have No Credit Requirements
While traditional bank loans offer better interest rates, they can be difficult to qualify for, particularly for low-income Americans who have poor credit. About 30% of people have poor credit scores of 601 or lower, which could disqualify them from many traditional bank loans. In many cases, payday loans may be the only option left for individuals with bad credit.
Online Lending & Payday Loan Apps Make It Easy to Get Cash
Despite stay-at-home orders resulting in the shuttering of many payday loan offices, consumers can still apply for loans online, or using mobile applications on their smartphones. In many cases, it takes only a few minutes to apply for cash using these services.
Consumers who need cash fast and don’t want to wait or risk going outside during the COVID-19 coronavirus pandemic are increasingly turning to these services to get the cash they need to cover their expenses.
These Are the Reasons so Many Americans Are Getting Payday Loans
Payday loans can be an expensive way to borrow money. But the effects of this financial crisis mean that many people have no choice but to turn to payday lenders to cover their costs until they get government aid, or the economy recovers as the effects of the COVID-19 coronavirus pandemic begin to fade, so the payday loan industry is sure to remain strong even throughout these difficult economic times.
By Jitendra Gidwani
*The opinions expressed are author’s opinions and not necessarily those of the Yucatan Times.
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