Photo Credits: FreeDigitalPhotos.net "Stacking Coins By Hand" by Jomphong Hope
Artmeme Guest Writer Andy Horton of?Gimmedosh.com?provided this guest post. He has a background in IT as a business analyst and project manager primarily in financial organizations. Any is interested in personal finance and the effects of general lending and specifically payday loans on individuals and families.
The History of Payday Loans
It is best to first find out more about the origins of money and lending to the individual over the centuries before looking at its specific applications in today?s economy, especially the very niche payday loans and?short term loans?sector.
Money
The use of ?money? as a means of paying for goods and services has been developing in human civilization?for 2 to 5 thousand years.? It has taken many forms, from live animals to metallic objects, even whale teeth.? The current form of international use of coins and paper money can be traced back to more recent history, when ?banks? arrived on the seen in the 15th?Century.
Banks
The salient question at this point is, when and why did banks come into existence?? The main reason for banks developing in the civilised world has been the need for meeting the demands of traders, farmers and merchants.
In the Roman times farmers needed to regularly borrow from rich individuals to make ends meet until harvest time.? These early private ?banks? were effectively lending on similar terms to today?s ?payday advances?.
The modern type of banking didn?t surface until the middle-ages in Europe, when due to the Catholic religion?s edict on usury, any merchant or trader wanting to borrow money would have only had access to such finance from the Jewish community.
Banks quickly developed and became very powerful in the following 400 years from lending to the public, businesses, merchants, governments and each other.? We know where this all took us in 2008!
Lending
This has already been touched upon above, but the development and expansion of lending in more recent times needs to be explained in more detail.
Pawnbrokers have been one of the earliest mechanisms of lending to the individual, which have remained intact for centuries.? There will be more on this below.
There was a time that an individual?s route to access any temporary funds was through their personal bank manager for an unsecured loan or building society for a mortgage.
However, developments in technology and the growth of consumerism gave rise to the introduction of Credit Cards, which only added to the unseen ?debt bubble? in the developed world.
Nearly all the examples and historical accounts up to now have been based on the mainstream economy.? But, there are sections of the population that haven?t and still don?t have access to mainstream banking for their borrowing needs.
This sector was catered for from the early days by high street pawnbrokers and door step money lenders, who would charge very high interest rates for relatively small amounts of money for short terms of between 1 and 30 days.
The UK market for these short term payday loans has grown significantly in the past 10 years due to a number of factors.? Firstly, there has been the arrival of many high street cash advance companies that have really informed the relevant consumer about the availability of this type of lending.? Secondly, the internet has been a boon for this specialist lending service.? Finally, the credit crunch has resulted in a lot of people in the UK losing their good credit record and as a result their only route to borrowing some quick cash for an emergency or special occasion has been through payday lenders.
The Future of Payday Loans
Many young people with a good or no credit record have become regular users of payday loans in the UK, as many of them don?t want to use their credit cards or bank overdraft.? The online payday loan providers have given these young people the choice of borrowing small amounts of cash until their next payday knowing that they would clear the debt and not be left with a debt that will accumulate lots of expensive interest.
The anti payday loan campaigners have misinformed the media and the government in taking action to legislate against this sector.? The best legislation coming into force in 2014 as a result of the amendments to the Financial Services Bill is that all payday lenders will have a ?cap? on the maximum interest rate they can charge.
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