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History of Lending and Cash Advances

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The ability to get an online cash advance is a relatively new phenomenon when you consider civilizations planted the roots of modern day lending thousands of years ago.  As long as humans have been trading some sort of currency in exchange for needed or wanted goods and services, there have been those who needed to borrow for what they could not afford.  This began as simple, often interest free loans from friends or family, and grew into the complex and wide-spread system with endless borrowing options that we know of today.  This article will look at some of the ways different societies over different times provided financing to those in need of a cash advance, and how that led us to the modern-era of lending. 

As mentioned before, the first cash advances came in the form of loans between family members or friends.  Throughout thousands of years of change and through virtually every society, many people still often turn to their friends or family when they are in a tight spot and in need of extra cash.  If this is an option, it is often the best and most affordable way to obtain a cash advance as it is usually interest-free.

The first record of a truly formal and organized system of lending comes from Ancient Roman times. In fact, many historians credit the Ancient Romans with coming up with the first type of payday cash advance.  Often, wealthy lenders would offer loans to farmers who would use the capital to plant their crops.  The cash advance would be repaid when the farmer harvested his crop, which would have been equivalent to his payday.  Ancient Romans also pioneered the use of secured lending where collateral was held by the lender, and once the cash advance was repaid, the collateral would be returned.  If the cash advance was not repaid, the borrower would lose the collateral, and the lender would be able to recover some, if not all, of his losses with the value of the collateral.

As time marched on into the 1600s and 1700s, lending was extended to those who did not have valuable collateral to put up or crops that would promise future profit as a guarantee against what was borrowed, but these cash advances came at a steep cost.  Indentured servitude, the practice of requiring a borrower to work off their debt, became widely accepted. While this was legal at the time, indentured servants were often treated as poorly as slaves and looked upon with a similar negative regard.  Fortunately, humanity has evolved in the centuries since, and such practices are not only seen as deplorable but are now highly illegal in most areas of the world.

As the industrial and progressive ages swept through the United States, so did a change in lending practices.  Rather than cash advances being based on familial connections or ability to put up valuable collateral, lenders turned to financial information to determine whether or not to lend, and how much.   The use of credit cards became prevalent beginning in the 1950s, which opened up credit to regular people who may not have had access to any sort of cash advance in the past, allowing for purchases that may be just beyond a borrower’s means at that moment. 

As credit was extended to more people, ways to track how well consumers did keeping up with their payments and not letting their financial situations get out of control were devised. In the mid-1950s, the FICO score began becoming a popular way to get a quick snapshot of a consumer’s credit and determine the risk of offering a cash advance.  As the nation’s top mortgage lenders began turning to FICO scores in making their lending decisions, more and more lenders began using the service to the point where almost 90% use it today.

The large trend in cash advances over history has been opening lending up to more and more consumers, but not necessarily easily and still excluding large swaths of society. In the early days of lending, only those with valuable collateral were able to access the additional funds they needed. Meaning only those in the upper echelons of society were privileged enough to receive loans.  With indentured servitude, only those in the most desperate of circumstances, who were willing to give up months or years of their freedom were able to get a cash advance that may have been necessary for their family’s survival.  Then, as lending became more mainstream in the 20th century, people were still often excluded if they did not have a sterling financial history or high enough income to guarantee repayment. 

That brings us to where we are today.  Now, there are less obstacles than ever in getting a cash advance.  Online lending has become very prevalent, all the way from large mortgages or business start-up loans, down to payday cash advances.  Those larger loans still often have the requirements banks have always demanded, but products like online payday cash advances have cut out the need to work with large, complex financial institutions.  Getting a cash advance online has opened the lending world up to millions of people who may have been excluded if only the traditional channels remained.  As the modern age of lending has continued to flourish, more and more people than ever before have been able to get the funds they need without the requirements of having expensive collateral to hand over, a high income to guarantee repayment or a flawless credit history.  Most payday loan providers require no credit check and ask only for proof of employment to offer a cash advance.

As lending has evolved from agreements between friends or family members to collateral based secured lending, to loans based on one’s financial history, to easy to access online cash advances, more and more people have been given the ability to access needed funds than ever before. Hopefully, as lending and regulations continue to evolve, that ease of access will continue, and everyone who can responsibly borrow will have the opportunity to do so.

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