In this episode of
Money Creation Explained, we are going to cover How is IOU
Notes different from Payday Loans?
A payday loan is a short term loan that is offered to
individuals to cover short term immediate cash needs until
that individual gets their next paycheck. These small dollar
(ranges from $50 to $1,000), high cost loans can charge up
to triple digit annual percentage rates (APRs), and payments
are typically due within 14 days. If the loan is not paid
back in full in that 14 day period, then late fees are
assessed and many of these type of loans rollover and renew
themselves. This means any partial payments that were paid
are mostly applied towards the interest and late fees and
not the principal amount that was borrowed.
Payday loans function differently than personal and other
consumer loans. Most companies that offer this type of loan
are either through a physical branch with a payday lender or
online. Many payday lenders have few requirements for
approval. Most do not run any credit check on their
customers or even verify that the borrower can repay the
loan. All that is needed is typically a form of
identification, a bank account, and a steady paycheck.
According to many studies, payday loan APRs can total 400%
or more when you factor in all the fees and interest. Many
people that resort to payday loans, have poor credit or do
not have other financing options.
IOU Notes works differently from payday loans in that users
(individuals and business) are borrowing directly from other
users on the platform. Since they are working directly with
these other users they can easily, safely, and securely set
the terms (1 - 24 months) and (0% - 5% interest rate).
IOU Notes is a peer-to-peer credit and loan platform.
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