April 24, 2016

Short term cash payday loans

payday loans apply

What are payday loans all about?

They are becoming increasingly popular for Australians who need some quick cash. Put simply, they are high interest rate short term loans, usually taken out to meet urgent needs, for smaller amounts than personal bank loans. A bad credit history is no obstacle for this type of lender to do business with you. But in order to protect themselves from a default, they’ll request authorisation to take periodic repayments from your bank account.

Benefits of payday loans:

Convenience

 There are many service providers eagerly waiting to lend you money. Because short term cash loans are available online, there is no need to stand in a queue and fill out forms. 

You get your cash fast

Considering that most people get short term cash loans when they require urgent funds, the main selling point is how quickly it takes to get the money in your hands. Once your identity and income are verified, lenders use an electronic funds transfer (ETF) to send it to your account, usually within one day.  

Easy application and approval process

The online applications take less than 15 minutes. If you have never defaulted in another payday loan, and can provide proof of steady income, hen you should be easily approved. Gone are the old days of cheques and paper forms. No appointments with bank managers or phone calls to slow things down.

Choice on what you use it for

Unlike other kinds of loans, you can spend the money on anything you like. For example, you can get a payday loan for overdue utilities, to have your car repaired or to make the week’s rent. The verification process gives lenders the assurance that you will pay it back. They couldn’t care less what you do with it once it hits your account.

Disadvantages of payday loans

A vicious cycle:

Most people take up payday loans when they are in a tight financial spot. They may still need to more money for upcoming expenses, planned or otherwise. So they take out another loan on top of the existing one. As we can see, without financial discipline and a proper plan, someone can find themselves trapped in this cycle for a very long time.

Establishment fees

All payday loans have an establishment fee. It’s usually 20%. For short term cash loans of  a small amount e.g. $500, the 20% fee would be $100. By comparison, most banks charge $150 establishment fee for a personal loan, but it’s a flat fee regardless of the amount. 

Fraudsters

Short term cash loans are often targeted by scammers  looking to steal from you. For example, CNBC recently reported about debt collector scams targeting people who’d taken out payday loans. So it’s important to only deal with legitimate businesses, and to be vigilant for suspicious phone calls and phishing emails. There’s fake websites out there pretending to offer loans, but are set up to collect personal details and steal your identity. 

High interest rates

Unlike a secured loan on a car, payday loans attract much higher interest rates. This is understandable from the lender’s point of view, due to the bigger risk of default. As a borrower, no matter how desperate, you should stop to think how the agreed rates will impact repayments. 

It’s up to you

Short term cash loans do have their merits and help many people when times get tough. However, you should understand exactly what you are getting into, and draw up  a solid repayment plan, before you decide to get one. Without discipline you could find yourself in a deep hole very quickly. 

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