Lendico’s South African branch has produced a comparison chart in order to highlight the marked differences between peer-to-peer loans and payday loans. Peer-to-peer platforms are increasingly being positioned as the enemy of the payday lender. Many payday lending operations have come under scrutiny in recent times for not providing enough clarity about the nature of their product, as well as for the fact that these lenders often pay far too little attention to the borrower’s financial situation. In spite of these concerns, the payday lending industry is worth approximately 400 billion rands globally.
The primary gripe with payday lending is that borrowers often get caught up in a spiraling debt-trap. Although borrowers typically receive the loan extremely quickly, one missed payment can result in massive additional late fees. In fact, many borrowers end up having to take out multiple payday loans in order to repay their previously defaulted loans. It is for this reason that words like “spiral” and “trap” are so often associated with payday lending.
By way of pointing out the contrasting benefits of middle or long term loans – particularly of the peer-to-peer variety – Lendico South Africa has produced the table below.