Kevin Wack from the American Banker online journal analyzes the situation with the personal loan companies that work online. Several years ago, there were predictions concerning the decrease in the industry and the fall of some major market players. The main jeopardy to the industry was connected, obviously, with the long-lasting Covid-19 pandemic. It managed to harass the online loans in various interesting ways:
- The first tendency was connected with a changed lifestyle and staying at home for work. People did not leave their houses and paid less for gas and public transport. Consequently, the everyday expenses were cut, and the need for instant money was decreased.
- On the other hand, many public services were shut down for an unpredictable amount of time, and many workers lost their jobs. The tension on the online loan services raised dramatically, and most minor companies could not allow themselves an increased demand for money and services. Many minor companies lost the competition to global and more flexible ones.
In comparison with the land-based loan offices, the online sphere suffered less. The very concept of the instant payday loans online guaranteed approval sphere does not imply hiring enormous staff and opening many branches that risk being closed. However, some negative consequences did catch online companies. For example, the average maximal limit for a personal loan has decreased from $1500 to $1000 in the US. The companies became more cautious with the clients and their legal documents. Now, you can hardly find a company that will lend you money without an employment certificate.
How Payday Loan Online Companies Adapt to The New Reality?
Kevin Wack indicates two possible ways out for the personal loan sector. The first one is a hope for the immediate growth of the sphere as soon as the pandemic situation settles. Indeed, the market changes are vivid already: The overall income in the sphere had stopped falling by more than 5% every month since May. Summer moths showed a stable tendency to stop at 4-3.5%. At the same time, many workplaces become open again, letting people return to their usual salaries and financial management.
The second way to overcome the crisis in the sphere is a fast adaptation, which can be observed in the example of a trusted and renowned company called HartLoan.com. Since the pandemic, the online service has changed some approaches to the customer care policy:
- The average payday loan online size was recalculated. The company has turned its specialization from relatively big sums (over $2000) to smaller ones (not more than $1000).
- It allowed to reconsider the loan terms and make them less and more convenient for people. The company loses some interest rate incomes, but it becomes more affordable for a broader gap or clients.
- The simplified procedure of the loan approval allows processing more clients. The company experts check the background information within one hour, and the client does the other job (loan sum and term choices).
- The number of documents needed for getting a small loan is not that significant. The HartLoan demands only ID and employment proofs, for instance.
Such a strategy will not give the company rapid effects, compared to the other ones (stabilizing or taking business loans). However, it is the only way to remain attractive for the clients. They can deal with a smaller payday loan online easily. Consequently, they improve their credit history and become more valuable for the banks. Clients get more confidence in the company, and it attracts more people, even in our post-COVID times.