Why 40% of Millennials are Choosing Alternative Financing
As the Millennial generation has graduated from school and moved into the economically productive workforce, its members have become more and more disillusioned with traditional finance. Recent statistics show that more than 40 percent of young people have turned to alternative financing options, including pawn shops and payday lenders, to meet their credit needs. Here are four of the reasons that alternative finance has become so popular among the millennial generation.
Ease of Access to Alternative Financing
Perhaps the largest reason that younger people rely on alternative financing methods is the fact that they are easier to access than traditional credit options. Payday lenders, like those from Payday Express, for example, will usually provide borrowers with bad credit or no credit history at all with short-term cash advances. Banks and credit card companies, on the other hand, will almost never loan to such borrowers.
Small Loan Availability
More traditional lending institutions will always have their place in providing large loans, such as home and auto loans. However, many younger people only need small loans to cover relatively nominal expenses. In these instances, the smaller loan format that most alternative finance institutions specialize in is more in line with the needs of Millennials than the larger loan amounts that banks, credit unions and other large lenders tend to focus on.
Fast Turnaround Times
When someone approaches a traditional lender for a loan, there is a long process of credit appraisal that usually must take place before the loan is offered. Alternative finance institutions, on the other hand, let young people get the money they need on the same day they ask for it. When unexpected expenses crop up, these quicker loans can be vastly more convenient than loans that take days or even weeks to secure.
Simple Repayment Terms
Because of their small-scale, short-term lending structure, most forms of alternative finance have very simple terms of repayment. In a pawn loan, for example, the amount and interest of the loan must be repaid in a specific time frame or the item used as collateral can be sold off to compensate the shop for the debt. Such simple terms of payment are especially useful to young people who may not have deep financial experience yet and who cannot afford a lawyer or financial expert to look over loan terms.
These are just a few of the reasons that Millennials are turning toward alternative financing options in such large numbers. Ultimately, the key rationale behind all of these reasons boils down to the fact that alternative loans are more convenient for Millennials to use to meet their finance needs.
Hannah Whittenly is a freelance writer and mother of two from Sacramento, CA. She graduated from the University of California-Sacramento with a degree in Journalism.