Discuss about the Analysis The Payday/ Cash Advance Lending Industry In Australia.
With the change s in economic, financial institutions and banks have been gaining momentum in the financial capital market. The capital market of the Australia is highly volatile and many investors are inclined towards raising funds from the Banks and financial institutions. There are several ways of raising funds from the market such as bank loan, overdraft, commercial paper and letter of credit. However, with the changes in time, easy availability of funds is the prime concern for the investors. The pay day cash is one of the method to raise funds from the market. In this report document, risk and return inherent in the financial capital market has been analysed. After that contemporary issues impacting the financial investment decision and sustainable financial market have been evaluated.
The main purpose of this report is to analysis the Payday/ Cash advance lending industry in Australia.
Purpose of the report
The main purpose is to analysis the risk and return inherent in Payday/ Cash advance lending industry in Australia.
Payday/ Cash advance lending is defined as process which could be used by person to get the money in emergency if he cannot wait until the payday. With the high volatility in the Australian capital market, many investors use this Payday/ Cash advance lending to grab the investment opportunity and create value on their investment.
Payday/ Cash advance lending have been known as small loan market which is valued approximately $ 400 million a year within 12 months (Robinson, & Schwartz, 2017).
There are several ways which could be used by investors or other person to raise the funds from as bank loan, overdraft, commercial paper and letter of credit. However, Payday/ Cash advance lending is the most desirable option to raise the funds within no time. In USA. UK, Payday/ Cash advance lending has reflected average growth of 22% since last three year which is remarkable achievement (Marston, Banks, & Zhang, 2017).
Payday/ Cash advance lending is accompanied with the high complexity and paper work. If borrower wants to raise funds from the Payday/ Cash advance lending market then he firstly needs to write a personal check payable to lender for the amount of capital which he wrote in the favour of company. After that, lender will lend the money to borrower subject to the fees charged for the same. Nonetheless, Payday/ Cash advance lending provides easy and fast availability to borrowers but the fees and amount charged for this is comparatively high. In addition to this, if borrowers do not make repayment in time then the penalty charges and other consequences are also high (Stegman, 2017).
The Payday/ Cash advance lending amount is deducted or debited next payday. In USA success of the Payday/ Cash advance lending is highly remarkable which have become other venture investors to invest in this market in their respective countries. The success of Payday/ Cash advance lending is USA has been taken as perfect support pillar for the investors and borrowers to raise the funds from this mode. Small investors and other companies have been using this Payday/ Cash advance lending to raise the funds instantly and meet their requirements (Adeniyi, Whysall, & Brown, 2017).
Payday/ Cash advance lending is the good option to raise the funds but in USA many of the borrowers do not like this mode of raising funds due to its costing and penalties charges. As per the federal rules and regulations, Payday/ Cash advance lending has been regulated like other financial market (Williams, 2017).
There are certain requirements which needs to be complied by the investors before applying for Payday/ Cash advance lending. It is analysed that the principle loan amount cannot exceed AUD $ 1500 minimum fees charged on the loan would be 15%. The credit check will not perform until investors report to credit information services. Borrowers needs to have employment record and bank account on which they will write checks. These are the basic conditions which needs be fulfilled by the borrowers before raising funds through Payday/ Cash advance lending (Raman, et al. 2017).
With the increased GDP rate and national income of Australia, it is analysed that companies may use Payday/ Cash advance lending process to raise instant money requirement in their business. However, venture capitalist could also use this Payday/ Cash advance lending to set up a business plan to create value on their investment. The main reason of success of Payday/ Cash advance lending is based on its easy availability of the funds and less complex compliance program (Servon, 2017).
The Payday/ Cash advance lending loan size from # 100 to $ 1000, based on the state of legal compliance. The interest fees charged and penalties imposed is based on the certain criteria which needs to be followed by Payday/ Cash advance lender. The main benefit of Payday/ Cash advance lending is related to no security deposit and zero charge creation on the assets of borrowers. Borrowers only have to comply with the certain rules and regulations and documents. Nonetheless, failure to pay back the loan under the Payday/ Cash advanc1e lending may result to high penalties and charges on borrowers (Cuffe, & Gibbs, (2017).
The amount of fees charged under the Payday/ Cash advance lending is based on the amount of capital raised. However, fees increases with the increase in the principle borrowed amount (Chague et al. 2017).
|
Investors |
Amount of Capital borrowed |
Charges |
Total back payment |
|
XYZ |
$ 100000 |
10% |
$ 1,10,000 |
|
CBA |
$ 1,50,000 |
15% |
$ 172500 |
|
GHJ |
$ 2,00,000 |
15% |
$ 2,30,000 |
The table give above reflects that the % of interest charges under Payday/ Cash advance lending will increase with the increase in the borrowed amount (Ramirez, 2017).
The banking and finance sector of the Australia is stable and reflects the positive outcomes. In addition to this, increased balance of trade and high inflow of foreign exchange reserve may also be the positive point for the borrowers to raise the capital from the market in no time (Robinson, & Robinson, 2018).
As per the rules and regulation of the Reserve Bank of Australia, bank interest rate and repo rate have been decreased with a view to increase the flow of capital in Australian market. However, RBI has also promoted Payday/ Cash advance lending to lend the funds to borrowers for their particular needs. Payday/ Cash advance lenders also has to comply with the certain rules and regulations of the RBI in this financial capital market. However, they are not regulated by the RBI as like other banks. Borrowers are more inclined to raise funds from the Payday/ Cash advance lending when there is high flow of cash in Australian economy, availability of the investment opportunity, high volatility in the capital market and increased level of foreign exchange risk exposure (Mayer, & Martin, 2017).
For instance, if ABC investors has option to invest in the foreign exchange market and he finds that he could create arbitrage profit by entering into the certain future and forward contract with the banks, then in this case, he would analysis the whether the return on capital invested is more than the cost of capital raised from the market. In addition to this, easy availability of funds is given by Payday/ Cash advance lending will be much of use for the borrowers to create value on their investment (Melzer, 2011).
I have observed that Payday/ Cash advance lending is the most attractive lending options available to borrowers to raise the funds from the market in instant time. It will assist borrowers book the investment opportunity to create value on their investment. Payday/ Cash advance lending charges high interest amount. Therefore, borrowers needs to make sure whether the return available in the investment object is more than the cost of capital. Payday/ Cash advance lending should be taken only for the short time period. In long term, Payday/ Cash advance lending will be the highly costly for the borrowers. Now I could inferred that Payday/ Cash advance lending should be used only in case of emergency or when attractive investment options is available for the investors.
Conclusion
With the ramified changes in economy, Payday/ Cash advance lending has been gaining momentum in Australia. There are several venture capitalist who are investing their money in Payday/ Cash advance lending business process to create value on their investment. However, it is the best option for the borrowers to raise funds in no time at the time of emergency. Nonetheless, the Payday/ Cash advance lending will become highly costly when the loan amount is raised for the long term. The penalties and other consequences are also very high which should also be taken into consideration by the investors.
References
Adeniyi, O., Whysall, P., & Brown, A. (2017). Commercial locations and Social Deprivation: A Critical Assessment of Alleged Anti-Social Retailers’ Locations and Socio-economic Deprivation.
Chague, F., De-Losso, R., De Genaro, A., & Giovannetti, B. (2017). Well-connected short-sellers pay lower loan fees: A market-wide analysis. Journal of Financial Economics, 123(3), 646-670.
Cuffe, H. E., & Gibbs, C. G. (2017). The effect of payday lending restrictions on liquor sales. Journal of Banking & Finance, 85, 132-145.
Marston, G., Banks, M., & Zhang, J. (2017). The role of human emotion in decisions about credit: policy and practice considerations. Critical Policy Studies, 1-20.
Mayer, R. N., & Martin, N. (2017). The Power of Community Action: Anti?Payday Loan Ordinances in Three Metropolitan Areas.
Melzer, B. T. (2011). The real costs of credit access: Evidence from the payday lending market. The Quarterly Journal of Economics, 126(1), 517-555.
Raman, G., Arnold, R., & Samuel, D. A. Y. (2017). U.S. Patent Application No. 15/209,407.
Ramirez, S. (2017). Payday-Loan Bans: Evidence of Indirect Effects on Supply.
Robinson, C., & Robinson, D. (2018). Ethical Issues Related to Payday Lending. In Payday Lending in Canada in a Global Context (pp. 129-145). Palgrave Macmillan, Cham.
Robinson, C., & Schwartz, M. (2017). A Corporate Social Responsibility Analysis of Payday Lending.
Servon, L. (2017). Are Payday Loans Harmful To Consumers? Response To Horowitz. Journal of Policy Analysis and Management, 36(1), 255-258.
Stegman, M. A. (2017). Payday lending. Journal of Economic Perspectives, 21(1), 169-190.
Williams, L. (2017). Risk: Real property changes: Risk management tips for solicitors. LSJ: Law Society of NSW Journal, (30), 76.
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download