How do pay-day lenders integrate their communications?
Pay-day lenders use a website to promote their offers. This is the most widespread communication way as the target audience primarily includes young people and even underage ones. Also, some companies offering pay-day loans use TV channels to communicate their advantages. This promotion attempts to embrace adults and the elder population that watch TV. However, TV ads also call people to visit a pay-day lender’s website, get acquainted with the detailed information, and apply online. As a rule, a website provides some information about a lender, safety issues, and loan periods. There is also an opportunity to call and discuss any details with a representative of a pay-day loan company. Thus, pay-day lenders use the integrative method of communication that includes TV, the Internet, and phone calls.
Why do people ignore much of the information on the pay-day lenders’ websites?
Many people usually ignore some information presented on the pay-day lenders’ websites as they are in stressful situations. Usually, people are in dire need of cash when they apply for such loans. Therefore, they lose the ability to consider such things as the due date or high interest. Besides, many people who take pay-day loans tend to be financially uneducated, thus falling into a trap. For example, they ignore small print or think that even after reading they will not be able to understand financial terms. As a result, they have considerable debts and cannot understand how this situation might happen to them.
How might pay-day lenders avoid the risk of government intervention?
Government intervention into pay-day loan companies’ operation is usually caused by the misunderstanding between customers and lenders. On the one side, it can result from either ignorance or lack of information provided by a lender regarding the financial terms. This was described in the previous question. On the other side, some of the lenders do not follow the regulations established by the government. For example, sometimes they prefer not to identify the annual percentage rate of interest, stating that it depends on a certain loan. Another possible violation of loan regulations is the fact that some lenders do not point out that their pay-day loans are short-time and used in extreme situations. The government may interfere in the work of such companies and even ban them. Thus, it is important to eliminate the described issues to avoid government intervention.
How might the use of TV advertising affect people’s perception of the product?
It is not a secret that TV advertising has a huge impact on people, and those promoting pay-day loans cannot be an exception. These advertisements apply different strategies such as funny, serious, cozy, and so on. Focusing on people’s emotions, TV advertising creates positive attitudes towards a product. Therefore, many desperate people consider it as the last hope and push apply button. However, some experts believe that pay-day loans add more problems to people with adverse credit history by continuing to make them closer to new debts. Nevertheless, pay-day loans remain popular and can be quite useful and safe in case all the requirements of lenders are followed.
If pay-day lenders are not making an excess profit, why is their image is so poor?
Even though pay-day lenders usually do not make a huge profit, two things make them look unattractive: administrative costs and potential defaults. For example, in case a person takes a ÂŁ 50 loan, he or she is expected to return approximately ÂŁ 60, taking into account interest and charges. In the context of annual interest, it is about 3500 percent that is too much. Even though experts stress that pay-day loans are considered short-term ones, these costs are too high. Therefore, their image is so poor and is compared to loan sharks.