Historically, short-term loans for individuals with low to no credit have only come in the form of payday loans. These expensive loans typically require the balance to be repaid entirely within 14 days, else they will be renewed. Many clients who are not very fiscally endowed have a hard time paying these loans back in full. They get into a cycle of perpetual debt, and can pay back interest rates that are borderline extortionist.
With all of the regulation now coming down on the low or no-credit lending industry, consumers want to deal with businesses that care about their needs. It’s important that they deal with this company directly instead of going through an intermediary, so that they don’t have to feel like the odds are stacked against them. Some new lenders are popping up and tackling these challenges in a new way.
Giving consumers control over their finances
By allowing consumers to pick their own repayment plan, anywhere from a single month to a few months, consumers aren’t going to find themselves stuck renewing an expensive payday loan again and again. Short-term loans benefit consumers by providing comparatively low rates with the flexibility required by any modern lifestyle.
Cutting out the middle man
Many payday loan agencies go through several layers of finance agencies in order to mitigate their risk. Modern lenders connect you directly with the financing agency. By cutting out the extra middle men, these agencies are able to offer low rates and flexible repayment schedules.
Helping clients determine their financial position
Another important aspect of this customer facing business model is to help clients understand their own financial position. This can be a complicated matter for many individuals, so by providing them with a detailed form to fill out we are able to start an open discussion about how much of a loan they can afford. It’s in the lenders and the borrowers best interest to not loan an amount that is going to cut into vital expenses such as rent, food or bills.
What other small businesses can learn from this changing market
Businesses that pray on consumers are not sustainable. Although there are many unscrupulous lenders in the world, their mere existence just makes room for businesses that take the time to demonstrate how much they value their clients. Scenarios involving financial matters are often very confusing for the consumer. Businesses that take it upon themselves to educate their clients and help them make the best decisions will be rewarded with consumer loyalty and referral business.
Keep in mind your fiduciary duty. Nearly every client-facing business in the world provides some kind of good or service to their clients. When your consumer base trusts you with their money, it is your duty to make sure that those clients are taken care of and informed. Business that choose instead to mislead and trick consumers will never be able to establish a long-term business, while their competitors will reap all of the rewards of a consumer-friendly business model.