es making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the riskThere are several variables that force the lenders to charge such high interest rate for these loans (not they are not happy to do so). Truth is that though lenders that deal with these loans are often called predators, the costs and risks associated to lending through 24 Hs. Loans justify these apparently abusive fees. The reasons are mainly three: the lack of a credit verification process, the lack of collateral and the terms of these transactions.

Lack of a Proper Credit Verification Process

In order to deliver the amount requested in less than 24 business Hs., lenders cannot take the time to conduct a long credit verification process. That is why there are no credit checks done during the qualification process. Instead, only the presentation of proof of income and residence is required for approval. Sometimes, it is also required for the applicant to have a savings or checking account with a bank or financial institution.

The lack of credit checks turns these transactions into very risky processes and thus, the probability of default increases. In order to compensate for this, lenders have to charge higher rates or fees making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the risk

these apparently abusive fees. The reasons are mainly three: the lack of a credit verification process, the lack of collateral and the terms of these transactions.

Lack of a Proper Credit Verification Process

In order to deliver the amount requested in less than 24 business Hs., lenders cannot take the time to conduct a long credit verification process. That is why there are no credit checks done during the qualification process. Instead, only the presentation of proof of income and residence is required for approval. Sometimes, it is also required for the applicant to have a savings or checking account with a bank or financial institution.

The lack of credit checks turns these transactions into very risky processes and thus, the probability of default increases. In order to compensate for this, lenders have to charge higher rates or fees making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the risk

ness Hs., lenders cannot take the time to conduct a long credit verification process. That is why there are no credit checks done during the qualification process. Instead, only the presentation of proof of income and residence is required for approval. Sometimes, it is also required for the applicant to have a savings or checking account with a bank or financial institution.

The lack of credit checks turns these transactions into very risky processes and thus, the probability of default increases. In order to compensate for this, lenders have to charge higher rates or fees making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the risk

applicant to have a savings or checking account with a bank or financial institution.

The lack of credit checks turns these transactions into very risky processes and thus, the probability of default increases. In order to compensate for this, lenders have to charge higher rates or fees making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the risk

es making all pay higher amounts because of those that will fail to meet their financial obligations. It may sound unfair but the lender has no way to know which one is more likely to default on the loan because there are no credit verifications and thus, the lender needs to average the risks and the costs.

Lack of Collateral: Unsecured Loans

These loans are actually unsecured personal loans and so, they carry no collateral. The lack of collateral increases the risk of the transaction because there is no asset guaranteeing the repayment of the loan. In the event of default the lender cannot take legal action against any specific asset and thus the judicial process for claiming the money invested takes significantly more time and resources.

Short Repayment Programs, Low Amount

The loan terms also contribute to increase the fees because the lender needs to charge for an otherwise non advantageous transaction. The amount of money that is lent is rather small. Payday loans usually provide $1500 at best. This implies that the lender needs to collect the administrative costs and loan generation costs from a small amount. Obviously, when compared to the exiguous amounts lent, these fees are high.

And since the repayment programs are short (two or three installments at most), the fees cannot be sprea