Most people are familiar with payday loans. They are usually used to solve sudden financial needs, such as those related to urgent expenses that arise during the work week. However, you may be wondering if a payday loan is right for you.
A payday loan is a form of short term loan. It’s usually based on your next paycheck. It attracts high interest rates due to its immediate nature, but can help cover emergency expenses as long as you can repay the full amount borrowed with your next check.
According to their contract, the name “payday loan” was derived from the expected date when a borrower’s paycheck will be available.
Borrowers will write their checks for an amount equal to the amount they want to borrow, including finance charges, and receive money in return. In most cases, this is done with the consent of the borrower to provide access to the electronic bank account to receive or repay the loan over time.
Since this type of loan is unsecured, you will not give the lender additional security. With a payday loan, instead of putting up an item as collateral, the lender can access your bank account via wire transfer and withdraw the amount you owe.
Payday loans are usually repaid in full as soon as you get paid via your next paycheck. As a result, the interest rate for payday loans is fixed and will remain so for the duration of the loan. It doesn’t matter if you have a small or a large salary load, your payday loan will always be the same amount!
Most lenders allow a maximum loan period of around two weeks. However, some states have laws in place regarding payday loans, limiting the maximum amount that can be borrowed within a certain period of time, for example, ₱3,000 to ₱30,000.
There’s a lot to expect when getting a payday loan, but there are things consumers should be wary of before making a deal.
To begin with, consumers must have a bank account in good standing, personal identification, and a steady job that pays them regularly or from other regular sources.
Additionally, borrowers should ensure that they are financially responsible and accountable for their actions, as lenders do not normally investigate what borrowers plan to do with that money.
Payday loans can become difficult to manage if borrowers jump into them unprepared for the financial obligations that precede when the loan’s due date suddenly catches them off guard.
A recent report by the Consumer Financial Protection Bureau shows that for nearly 80% of payday loans that are tracked over a ten-month period, the borrower reborrowed or renewed these types of loans within 30 days.
One in five payday loans end up defaulting, but things are getting worse for those who had to take out installment payday loans online.
Payday loans are designed to give borrowers quick access to emergency cash at ridiculously high interest rates. Depending on your state’s maximum loan amount, they vary in size and the interest rates you might pay will increase.
The annual percentage rate of an average payday loan ranges from 390% to 780%. Also, the finance charge is ₱200 or ₱300 to borrow the money you need. For example, if you wanted to borrow ₱1000, that would translate to an interest rate of 490%.
Many people have mistaken beliefs about payday loans. They think they are just a way to get cash advances quickly and easily. However, if you are interested in a payday loan, take the time to educate yourself about this type of loan to avoid high recidivism rates.
Do your research to make sure you don’t get trapped in another cycle when the money you need is more than payday loans can provide.
It is very common for people to use their bank debit card to pay off a payday loan. Indeed, when you get the loan, you agree to allow your lender to withdraw money directly from your checking account each time the repayment is due. Always read the general agreements carefully before signing anything!
More often than not, lenders add late payment fees. Many checks and balances are in place to protect consumer interests. Therefore, if a lender takes more than they are allowed, whether by mistake or otherwise, they will have breached the terms and conditions of the agreement.
If it is difficult to repay your loan on time, the lender may give you a little more time to pay. This can be done by giving you more time to start repaying the original loan or by rolling over the loan.
A rollover occurs when the lender agrees to repay all of the borrower’s outstanding payments and begins a new arrangement to repay those payments in full. Beware of agreeing to an extension or rollover, as this means you will have paid more money for your debt than originally planned!
A payday loan is a great way to help you find a quick and convenient solution when you’re having trouble getting out of a major financial problem. However, you have to be careful not to go into more debt.
We hope you can take the information we have provided to make the best decision for you and your family. If you have any questions or concerns, please do not hesitate to contact Fastloans.ph at any time.