Outline for Proposal - Research Paper Example

PAYDAY LOAN SERVICES IN A CONVENIENCE STORE Problem statement The writer will explore the feasibility of establishing a Payday loan service in Topeka, Kansas. The feasibility includes exploring options of locating the payday loan service in a convenience store that is accessible. The room will have a counter for disbursing funds and maintaining records. Research will include state and local requirements for establishing payday loan service as a sole proprietorship, competitors’ analysis for internal assessment for crafting payday loan service strategies, and a market analysis to study the lending rates and charges in relation to pay loan services in Kansas State.

Research questions 1. Who are the users of payday loans? 2. Do the payday loans solve their financial problems? 3. What is the eligibility for obtaining a payday loan? 4. Who are the competitors in the market? Purpose statement To promote access to diverse, healthy and comprehensive financial services for households in Kansas. This will be through offering cost-effective loan rates and innovative methods of loan applications for customer convenience. Literature Review What is a payday loan? Payday lending business will provide short terms loans for a maximum period of two weeks, to households who are in need of money or individuals that do not opt for other sources of credit.

Caskey and John (2012), define a payday loan service as a loan gotten from a business that is not a bank. Thesebusinesses operate under different titles and take postdated checks as collateral. Hodson (2009) describes a payday loan as a short term borrowing where the borrower borrows money at a high interest rate. The borrower writes a postdated personal cheque in the month they wish to borrow including a fee in exchange for cash. The borrower does hold onto the cheques and cashes it on the agreed upon date.

How pay day works The borrower visits a lending store and secures cash, which is due in full at the borrower’s next pay day. The borrower then writes a post dated cheque with the full amount including the fees. Upon maturity of the check, the borrower returns the loan and if he fails to, the lender redeems the cheque.The borrower incurs a bounced cheque fee from his bank plus the cost of the loan. The loan incurs additional fees and an increased interest rate for failure to pay (Schurter, 2012).

The writer will have well laid down policies that govern mutual understanding between the business and the borrower, in that the borrower will pay the amount by the next pay day which will be after 14 days. Eligibility to qualify for the loan will be for persons with steady jobs and persons above the age of 18 years. This will be verified via pay stubs and bank statements. The process of loan involves the borrower securing a small cash loan pay, he then writes a postdated cheque which is a form of collateral to the business in the full amount plus loan fees to the business.

When the cheque matures, the borrower returns to the business to pay the loan in person. Advantages of payday loans Research by Payday Loan (2013) supports the merits that payday loans offer to its users. This service allows people with little no credit to get credit of $700 and above in a day. Less bureaucracy in application as the applicant only needs to provide proof of employment and recent pay stubs. Payday loans does offer quick cash for any reason and less paperwork is involved in the application as the