Every year millions of Americans turn to short term small loans when they are in the pinch. No one ever desires one of these loans, but when someone needs money fast, to cover emergency expenses or to make ends meet briefly, these small loans are essential.
It has been estimated that small loan borrowers spend well over 7 billion dollars a year. This includes over 20,000 store front business, as well as hundreds of small online lenders.
As technology evolves and grows, so do smaller loans. Data gathering has become so advanced that new and even smaller loans are emerging. These are targeted towards very specific borrowers.
Once upon a time, borrowing money was a lengthy process. It took time, effort, and a whole lot of paperwork. These days you can apply for, a receive, a loan within seconds, sometimes even at the point of sale.
A Small Loan for Jeans?
Companies have emerged that offer point-of-sale loans. Most famously, there is the story of a customer using this service to borrow $200 for a pair of jeans. The loan was offered, accepted, and approved in the store, at the cash register, within seconds.
Thousands of different businesses have partnered with these lenders. Point of sale loans can be found for plane tickets, mattresses, online classes, and even some luxury items. They are trying to make credit cards obsolete, and change the way Americans shop.
This could re-define impulse shopping! But this isn’t a fly-by-night operation. Even though critics say the loans are too costly for borrowers, these loan companies are growing by leaps and bounds. And by using soft credit checks and the dizzying array of personal data online, they have much high approval rates than other small loans.
Can Small Loans be Too Small?
What may be most interesting about this development in loans is that American consumers show great interest in tinier amounts of money.
Banks and credit unions used to be the only legal way to borrow money. Payday lenders, installment loans, and title loans all became popular very quickly. Not just because they were easier to obtain, but because of smaller loan amounts. Banks were only interested in lending thousands of dollars, not merely a few hundred.
Not all people want or need to borrow large amounts of money. Small loans are attractive because they allow people to borrow only what they need, not a penny more. This makes them substantially easier to repay quickly.
And now a new breed of smaller loans is here, much more targeted and even easier to obtain. They have been called the credit-card killer of loans. But they may end up being the ultimate form of loans.