Payday loans, as the name goes, are those types of loans that you opt for when you need instant cash and other options are not available.
It is usually a short-term loan that you take and since it is available at such short notice, it also charges high rates of interest. Emergencies can occur any time in your life and if you need money instantly, payday loans are thought to be the one of the best solution.
However, just like these loans are very convenient and easy to obtain, they also have their down side.
You must weigh your options very carefully before you decide to get apply for a payday loan, as some payday loan have been said to charge interest rates of up to 572%.
Payday loans are available on a short-term basis (usually 2 weeks) to help you meet a financial emergency until your next payday.
Toy are expected to repay the loan once you receive your paycheck. The interest rates on these loans are rather high, and usually the main reason for this is that they are available on such short notice.
If you need cash fast and are not able to get credit at the bank, you may opt for these loans.
How much can you borrow on Payday loans?
This depends on the net income that you have after tax deductions. The best part about these loans is that there is no check done on your credit history.
While there might be other terms and conditions that govern Payday loans that vary from one company to another, the basic requirement is that you must be 18 years of age or over and employed with the same company for the last 6 months at least. You also need to have a bank account that is at least 6 months old.
Payday loans interest
The rate of interest charged by payday lenders is quite high. It will be anything between 15 and 30% of the amount you borrow. It is then made payable on top of the amount that you have borrowed.
The loan companies usually have their justification for such high rate of interests. The first reason is that these loans are made available to anyone irrespective of the credit history he/she has provided he/she fulfils the basic eligibility criteria.
Banks have a very strict procedure of approving loans, which the Payday loan companies don’t. Paperwork is almost minimal in Paypay loans. These are the few advantages that these loans provide to you and these are the main reasons why such high interest rates are charged.
There is a lot of controversies surrounding the Payday loan industry and how the loan is used by their clients. Government-funded consumer champion, Consumer Focus claimed that “borrowers are becoming dependent on high-cost credit they cannot afford to repay.
People are turning to supposedly “last resort” payday loan companies again and again, rather than using them only in emergencies. The extremely high interest rates charged by the company tends to push people who use them regularly into deeper debt than they were before.
UK is not the only country where Payday loan is giving the authorities and consumer organisations concerns. In USA, the Mississippi Senate recently gave final passage to a bill designed to reduce fees on payday loans.