Payday loans are an amount of money, taken from your next paycheck and given to you immediately at extremely high-interest rates. These are given for a short period without any collateral, thus making them an unsecured type of personal loan. Also, these loan givers usually exploit the consumer with extremely high rates of interest. There is no concern or sympathy for the borrower, whether they will be able to repay after adding such high interests, and on top of that, there are hidden charges involved which shoot up the amount even more. These loans are sometimes also known as predatory lending. Read the following denverpost article to find out more about this type of loan.
Is the interest on payday loans fixed or variable?
Payday loans are usually paid as a whole; there are no payment options that include installments or EMI’s. This is done once the person receives their next paycheck or the paycheck of a month that has been fixed as the time to return the loan. Since there are no installments, there are no variable interest rates. It is a fixed rate, that the borrower and lender agree upon and it usually ranges from 1-3% on every 100 dollars borrowed.
Since the interest rates are extremely high, in some places the government sets a maximum interest amount beyond which no person can charge. If the lender does, the borrower can file a complaint and the lender will be punishable by the law.
Security required
Payday loans are usually given without any collateral, hence they are also called unsecured loans. It also does not require you to take the money against a costly or valuable item. The lender instead asks for a guarantee directly from your side, which may include having the authorization to take the money directly from your bank account in case the money hasn’t been re-payed even after the completion of the agreed time frame.
Is the payday loan debt ever forgiven?
Usually, the lenders never forgive payday loans. This is because the lenders generate a huge revenue off of the interest collected on these loans. Hence, unless you and the lender have a special relationship, the loan will rarely be forgiven.
You should always try to pay the loan back as soon as possible to avoid increasing the interest rates. Also, if you fail to pay the loan, the lender may inform and file a complaint to the credit bureau. The people of this office will pursue you and be behind you to continue to get the principal amount along with the interest you owe. They will not leave you alone unless you do so. This can not only be quite annoying but also affect your credit scores. Low credit scores will hinder your chances of getting a loan in the future.
How to get a payday loan?
A payday loan is usually lent by shop owners and merchants that give you the needed amount on the same day, as it doesn’t require much paperwork. The principal amount is usually based on the accumulated income, over a few months, of the borrower. This is done with the help of stubs and letters given by the borrower’s employer.
Payday loans are generally not the safest option and will cost you a large interest that may be as much as 780% of the original principal. Hence it is not the safest option and there are other personal loan options that you can apply for.
