All About Payday loans!
We have heard a lot about them, isn'tit!! Thereare many controversies against and many people calling it a boon! But, what is true? Perceptions may change and can, but the fact remains the same, it can never change, inspite of any circumstances.
Payday loans are something most of them love to buy! As the same says, it's a loan taken to adjust the pay checks received, the loan taken to complete the commitments that went spoilsport with a bad paycheck.
It's a kind of debt that is actually dangerous, and deadly too. Thinkingwhy? Well, read on further to know about this!
What is exactly payday loan?
In common terms, it's a short-termloan, whichis aimed to clear the gap between monthly commitments and cheques.
Many times, due to over leaves, insufficient funds or an additional commitment in a month leads to crunch at the beginning of the month itself.
Rules toobtain a payday loan?
Well, there areno hard and fast rules on this, easily accessible by all, that's what manyads say and hence the number of people availing this is higher.
There are no specific rules imposed on this type of loan, as to the fixed interest rate and its guidelines for late payments. This has led to series of issues, where the loan giver has implemented interest upto 400% on the amount taken. If this becomes a trend, then there will none re-payer, as the interest rate is way too high!!
But, after many issues, the association for financial board got interfered and put some rules to check a person'srepay capacity and offer amount according to his/her paying capacity.
Working onthe loan strategy:
So, need to know how this actually works! Let's consider this asan examplelike you have an emergency situation, your car has got an issue and you need say $500. So, you can directly approach the lender online. After entering all the personal information about you, you must enter the amount you need, and along with it, accept to give back a service charge of 40-50$, based on each lender.
You must be giving a post-datedcheque or your banking information needs to be pinnedso that the transfer can happen directly. You have 15 days' time, at the end of 15thday, you are supposed to pay back the loan, failing which will attract late penalty on the 540/550$.
To whom it attracts and is benefited?
Well, in the USmost of the people rely on this scheme to meet their monthlycommitments. Anyone under a payment slab has the capability to get a payday loan, is eligible. Its seen as an alternativeto the credit cards and other credit loan schemes.
The most payday loan users are:
People whose income is below 40k$ per annum
Divorceeor single or single parent
Student who hasn't completed graduation
Alright, let'ssee the benefits this widely used schemeoffers.
Easy and quick access to small loans
A temporary solution to emergency needs
No checks or security check done, usually, which eliminates the option of no money
Well, for every good thing, there must be a downside too. so, let'stake a look at the downside too:
Repayment on time
The Latepenalty is usually very high.
It'shighly expensive to utilise this scheme as often as possible. The interestthat you end up paying is many times higher than the actual money that you borrowed
It's a huge debt in the longer termor using it often for a long period
Better alternative options:
Though they are given only on complete security check, it's always more and much better than payday loans. The interest that you pay is minimum 9% and at the most,a compounded interest totalling to 30% not beyond, whereasthe payday loan is charging you 400% of interest. Since the principal is smaller, you don't realise.
Take up a personal loan:
This is the best option. As the interest rate is low and the payment has more time and flexibility is better.
Take an advance from your employer
Utilise the overdraft strategy
Take a small personal loan
Make use of your savings account and borrow money there