Did you know payday loans make up about 67% of all credit held by South Africans between ages 25-39? There is no doubt they play an important role in the lives of thousands – possibly millions – of people. Life is full of unexpected surprises, perhaps you’re in an emergency and you need cash quickly to sort it out.
The 10 things you need to know about these Pay Day Loans.
1. There is No Collateral Required
We know that banks and other formal lending institutions go after the property of people who default on their loan repayments. With payday loans, you don’t have to worry about this ever happening to you, because lenders won’t ask for any asset as collateral. Payday loans are unsecured loans, which has its own benefits. No form of collateral is required to obtain the loan. You will, however, have to provide documentation proving your ability to repay the loan. These loans are designed for people who are in active employment. So that come payday, you will be able to repay what you owe.
2. High-Interest Rates
Payday loans differ from most loan repayments as they have fairly high-interest rates in comparison to other loan forms. Currently, in South Africa in accordance with the National Credit Act, the maximum interest that may be charged is 60% per annum or 5% per month.
3. You Can Get the Money in a Few Hours
A payday loan is your ideal solution because approvals are fast. Need money in one or two hours? Payday loans have you covered. There are no credit checks (though some lenders perform credit checks) to determine your credit rating or other processes that can potentially delay your application approval. As long as you’re actively employed and hold a bank account, approval is quick convenient and fuss-free.
4. Watch Out for Loan Scams
Unfortunately, not all payday loan lenders are genuine. When you apply for a payday loan, you have to take certain measures to ensure your preferred lender is authentic. It is vital for you to ensure the lender is registered. Watch out for lenders who ask you to send them money so that they can process your loan. Payday loans do not come with a processing fee. It’s important to keep your cool and find a lender who won’t prey on your desperation.
5. You Could Sink Into Debt
While payday loans can help you get out of a sticky situation, they can also sink you into a deeper hole. It’s not uncommon to find people taking out more loans to repaying existing payday loans. When borrowing this loan, you have to be extremely prudent with your financial planning.
6. Look Out for Hidden Fees
Beyond the interest charges, it’s common for payday loan providers to introduce some hidden fees. This could chew into the amount you applied for. Be sure to read all terms and conditions. Don’t just skim through to the end and click agree. In those terms and conditions, you’ll likely unearth hidden charges such as initiation and service fees.
7. Lender Harasment
If your loan is repeatedly getting carried over to the next month, your lender may not be so patient to let the amount accumulate. It’s for this reason some lenders resort to (often illegal) strategies to get their money. If your lender isn’t reasonable, expect several calls cold calls at odd hours.
8. Talk to Your Lender
What if your loan gets approved today, and you lose your job next week (before your paycheck checks in?) This means you are unable to repay the loan. Don’t wait until the lender comes looking for you, the best thing to do is to talk to your lender. Tell him what happened and provide termination letters to prove your story. He may still roll over the loan plus interest to the next month, but he’ll certainly give you time to get your act together and pay up.
9. Your Credit Score
Payday loans are designed for people with a low credit rating or those who cannot easily access credit facilities in banks. As such, many lenders have no interest in your score. Their primary interest is your wages. However, if you’re unable to repay, your lender could hand you over to a collection agency.
Payday Loans may help us make ends meet when emergencies strike but they can quickly turn into a source of distress if misused. Apply for a payday loan only when you’re in a pressing financial fix, and don’t go for more than what you need. At Payday Loans, you can trust us to take care of you in your time of urgent financial need.