The market nowadays places the modern market, even modern banking, in front of increasingly difficult challenges. The global financial market requires special expertise, knowledge and innovative models of modern banking. Thanks to the inventiveness of the financial market, today we have hundreds of new banking products. Payday loans occupy a significant place in this modern financial marathon.
These kinds of loans represent a short-term way of borrowing that is most often associated with sudden life situations. This refers to challenges that need to be addressed immediately, without long delays. There are many such situations, they can happen to anyone but one thing they have in common: they must be resolved as soon as possible. In difficult times, people try to find a solution in every possible way, without even thinking about the consequences after resolving the situation. It is very common for people to live from loan to loan, waiting to repay one so they can take another. Payday loan then looks like the only true friend. Very often, this type of loan is necessary only to maintain current liquidity.
Through a payday loan agreement, the lender will approve a loan with a high-interest rate, depending on your current income. In a short time or immediately you will have your money, but be aware of the risks you take. We have done a little research and dealing with the pros and cons of this type of loan. We single out of 5 things you should know about the payday loan interest rates.
1. Incredibly high-interest rates
Payday loans all have huge interest rates. They sometimes can reach an incredible 600%. Just to remind you, the credit rate on credit cards ranges from 12-30%; personal loan goes up to 10%; personal loans up to 35%. You must be wondering now how this is possible.
Statistics show that over 75% of payday loans are not repaid within the agreed deadline, which is usually from two weeks to 5 months. After that, the initial amount grows together with the interest. This is why this loan is called a monster among loans.
The States have tried to step in the way of such enormously high-interest rates with certain regulations. That’s why they are forbidden in 12 countries. Some countries have limited the interest rate to 36%. However, some do not have any restrictions. Interest rates are just rising and rising, and in Texas it could rise by up to 662%.
You still don’t understand what that actually means? Here’s an example: you need 300USD. If you repay the debt within two weeks, you will repay a total of 370USD, which, you will admit, is not much. But the trap is still waiting for you: if you return it by the deadline, which is 5 months, you return 1 001USD.
2. Additional fees
High-interest rates are not the only problem. If you cannot return the money by the deadline, additional fees may be waiting for you. We say it may be waiting for you, because it is regulated differently from country to country. That is why it is very important to get as much information as possible about this before you decide to take out this type of loan. Additional fees may exist for different settlements. For example, when a landlord tries to cash your check or withdraw your money electronically, and you do not have enough funds in your account, in some countries an additional fee is paid. There is also a fee to postpone the loan repayment period if you cannot repay it on time.
3. Online payday loan
One of the options to take out this loan is also online. This can make your job much easier and save you time. In order not to wait in long lines in banks or other financial institutions, there are various online platforms that provide you with quick money. With just a few clicks and entering certain information, the loan is in your account. One of the secure payday loans online you can find at WorldPaydayLoan. You can get this type of loan even without leaving your comfortable living room and that’s one of the biggest advantages of this loan. It doesn’t take more than 15 minutes and you have the money you needed.
4. The payday loan won’t be entered into your credit history
Unlike classic loans, this type of loan will not be entered into your credit history. Whether this is the good or the bad side of this loan is how much you are a good and regular payer. If you repay the loan properly and try to meet the deadlines, it will not help you to be better ranked for a serious loan or credit in the future. If, on the other hand, you are late and don’t repay the loan within the agreed period, don’t worry, you won’t get negative points for your credit history.
5. Don’t think about these loans as a bad thing
These loans involve a short repayment time. If you don’t have a secure source of income this can be a real nightmare. However, for all those who know how to calculate with money, this can be an ideal financial solution for all those who do not want long-term financial obligations. Its return costs are kept to a minimum if you are a regular payer. There is no increase in the interest rate, no additional payments, for regular payers this is a real paradise.
A payday loan can be made as an ideal solution in certain situations. However, before you decide to take this type of loan, it would be good to make and put on paper a repayment plan. Plan well for the next 5 months, check if it is possible to return it within the minimum time limit. If the calculation shows you that you are not in the financial situation to repay this loan regularly, there are alternative loans that you can turn into. In that situation think about credit union that can help you get a loan at a much lower interest rate. There are also various a credit unions that can give you a loan of 200USD up to 1,000USD within 6 months. You can also ask your employer to pay you in advance, without adding fees.