When it comes to payday loans, Payday lenders have faced criticism and bad publicity for the services that they provide to the public. Payday lenders have been blamed for cheating the public, promulgating poverty and stealing from the poor. These allegations may be all well and good, but the consumer who takes out a payday loan needs to be responsible for their actions and therefore here is as a guide: What is a payday loan?
• A payday loan is a short-term high-interest loan. That means that if you take out a payday loan it is important to understand that you need to be sure that you can pay this loan back in a very short period of time.
• A payday loan is designed to be exactly what the name suggests. A loan that you take out now and pay back when you receive your next wage packet. These loans are ideal for people who have an income and need to get their hands on some quick cash that they can pay back in a few weeks.
• Because the payday lender takes a huge risk when they are lending money to you so quickly and for such a short period, the lender usually charges an extremely high rate of interest. Commonly they can charge up to 1500% APR, compared to the 18% percent for the average credit card. New rules limit payday lenders from charging more than 0.8% interest a day. It is still very expensive because if you were to borrow 100 pounds for 30 days, the interest alone would be 24 pounds. That does not include any other charges or fees.
• Your debt can be rolled over twice. This means that you can push repayment over another month if you cannot repay. Even legislation requires payday lenders to provide you with information about debt help services; you will still incur charges and more interest for the additional two months of roll over.
• Payday lenders can also set up a CPA (continuous payment authority) so that they can withdraw money straight from your bank account. You have the right to stop this, and the lenders only have the right to two failed attempts before they have to contact you.
What is a payday loan? Avoid the trap of falling into debt
Many people rush off to the payday lender because it is an easy way to get their hands on some quick cash. Although the FCA has put some strict regulations into place, if you don’t have a bad credit record or other payday loans you are most likely to be approved. Payday lenders do cross reference to check if you have other loans and don’t be deceived; they are required to do a credit check. So what is a payday loan? It is definitely not a quick fix. Do not take out a payday loan if:
• You need cash to pay off other loans or debts
• You have other payday loans
• You are not absolutely sure that you can pay it back
• If you want to buy things, you otherwise can’t afford even with your pay packet.
That is what a payday loan is. A loan t tide you over until you get the money you are expecting to receive elsewhere so you can pay the loan back.