How FinTech Will Overtake the Payday Loan Industry

One of the major issues of the modern (Western) banking industry is the two-tiered system. You have the privileged who, born into a solid financial base, can easily access the funds needed to start their way on the road to success, and the unprivileged, who are not given the easy access to capital and are forced to find other arrangements. Unfortunately, nefarious elements saw this opportunity and did everything to exploit it.

Payday loans are a known evil in today’s financial world. These companies use predatory lending to prey on the desperate and creditless members of society and tie them into loans with ridiculous repayment terms and interest rates. Although the problem was well known and various levels of the government promised to bring in legislation that would limit their ability to charge such punitive rates, the people who patronized the payday loan companies were not really offered a solution that would get them away from this problematic industry.

And then we entered the FinTech era and the banking industry was given a much needed upgrade. Suddenly the people the financial industry had been ignoring were seen as viable clients.

As for the payday loan industry, they are going to find themselves in trouble. FinTech startups are launching competitors that are easy to use and won’t destroy the lives and financial futures of people who have to take out loans.

One of these startups is Magical Credit. Founded in 2014, the company wants to give people a more cost-efficient way to borrow money. With interest rates as low as 46% APR (compared to payday loans, which have an average APR of 400%), these loans are a life saver for those members of society who don’t qualify for loans from the big banks.

Calling their loans ‘installment loans,’ Magical Credit offers people loans between $2000 and $10, 000, then sets up a repayment schedule on a one- or two-year schedule. People get the money they need when they need it, as the FinTech innovation running behind the company means the application is an easy online process and the money is transfered within a few business days.

Big banking does not have a good reputation and payday loans are seen as sharks of a different color. This becomes an issue for people who need money, and especially when their credit scores may not be gleaming. Isn’t it wonderful to know that FinTech is there to provide a solution, giving people the chance to live out their dreams without losing their shirts?