What is a payday loan?
This may seem like a convenient way of staying afloat at first, but very high interest rates will put you in an extremely difficult position if you can’t pay off your payday loan.
The “payday loan” is a fairly recent financial innovation. Over the past few years it has become increasingly popular amongst people who find themselves with too little money each month to cover their living expenses.
These “payday” loans can be very difficult to manage if you don’t repay it in full as per the terms and conditions of your original agreement. If you don’t repay your loan on time, interests and charges can quickly turn what seemed to be a reasonable short-term solution into an overwhelming amount of debt.
PAYDAY LOANS FOR PEOPLE WITH BAD CREDIT
In a financial environment that can make it difficult to obtain credit, a payday loan might be seen as an easy solution to your short-term problem. That might also be true on a short-term basis, but payday loan debt can quickly become an enormous problem if it isn’t paid off in full on the date that you agreed to do so.
These loans are designed to be a short-term solution and to address a short-term problem. In principle the product works like this; you borrow a relatively small amount, for example R 2 500.00 for a short amount of time, say 30 days. When you’ve been paid by your employer, you repay the R 2 500.00 with interest, which might be set at R 623.17.
Some people might see an R623.17 charge as being an acceptable amount to pay in order to borrow that money. But if you calculate the annual interest rate, in order to compare it with the cost of other loans and credit, this interest rate can be very high indeed. For example a credit card’s interest might typically be around 20-30%, whilst a payday loan’s annual interest might well be over 250%.
TOO MANY PAYDAY LOANS?
Payday loans can easily spiral out of control if not paid back in time. Without access to alternative means of credit, a debtor who defaults on a payday loan often feels there is no other option but to look for another payday loan company. The debtor is likely to end up defaulting on the large payday loan repayments. If the debtor defaults on this repayment, then the interest charge that is applied will be very high and the company will also start with legal steps for collection of the debt.
HOW CAN FINANCE HELP 24 HELP YOU WITH YOUR PAYDAY LOANS?
If you’re worried about your payday loans, then in the first instance contact Finance Help 24 for free debt advice. We can assess your income and expenditure and suggest ways that you can improve your budgeting to maximise your income and minimise your expenditure.
As a Finance Help 24 client, you’d benefit from being able to let us speak to all your creditors on your behalf. Some people might feel this alone is enough to give them peace of mind. If debt counselling is a suitable solution for you, we would ask all your creditors to freeze or reduce interest rates on your accounts, and request that they accept a reduced monthly repayment that is based on what you can reasonable afford to repay.
PAYDAY LOAN HELP
As a next step, contact Finance Help 24 for free, sympathetic and immediate advice regarding your financial situation.There might just be a number of debt solutions that are appropriate to your needs, and we will explain all your options impartially. Call us on 0825872163, send an e-mail to firstname.lastname@example.org explaining your situation, or fill in our contact form to request a free call back from an understanding consultant.
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