What is a payday loan?
February 29, 2020
Payday loans are loans that a bank or other lender grants but is secured against any asset, such as a home. They are also known as unsecured loans.
Payday loans – pluses
You may be able to borrow more than a credit card. Loan repayments will usually be set monthly, which can make your budget easier. The interest rate paid for a Payday loan is usually fixed (but not always – check that it is not variable). You can choose how long you want to pay back the loan. Remember that the length of the loan will affect the amount charged with interest. You can consolidate several debts into one Payday loan, which can lower your monthly repayment costs. But be careful because it can mean extending the length of the loan and you will have to pay back more. You can make overpayments or repay your Payday loan in whole or in part at any time before the end of the contract without penalty.
However, if you pay back over $ 8,000 over any 12-month period, the lender may charge you compensation (although the amount that the lender can charge is limited by law).
Payday loans – disadvantages
Payday loans have a higher interest rate than other forms of loans, especially if you want to borrow smaller amounts. Since the interest rate can reduce more borrow, you may be willing to buy a larger loan than you need. Most banks will not lend less than 1000 for less than 12 months. So he may end up borrowing more than you need, or he can afford.
What is the loan period for a Payday loan?
You have a 14-day withdrawal period from the date of signing the loan agreement or receiving a copy of the agreement, whichever comes later. If you cancel, you have up to 30 days for a refund. Interest can only be charged for the period in which you received the loan – all additional fees must be refunded.
What to look for when it comes to a Payday loan?
You probably can’t advertise an interest rate. Only half of those who apply for a loan should get such a rate or better – but that could mean that half pays more.
If your credit rating is less than ideal, you can be accepted for a loan but with a much higher interest rate. Ask the lender for an offer before submitting your application.
How do you check your credit report?
Some Payday loans have a variable interest rate. If you can afford the initial repayment, you should avoid this type of loan in the event that it goes up. Pay attention to any fees that make the loan more expensive. Make sure you include them when calculating how much credit it will cost you. Think carefully before accepting any payment insurance that your lender is trying to sell you. It is insurance that covers the repayment of a loan in the event of an accident, sick persons, persons unable to work or losing a job.