If you are tempted at looking into a PayDay loan, there is one piece of advice you need to hear – Run…Fast! This trap is deceptively easy to fall into, and unlike other alternative cash loans available. It is a sure-fire way to get yourself into even deeper dept, and ultimately, more serious financial trouble.
A PayDay loan, as defined by Wikipedia, is a small, short-term loan that is intended to cover a borrower’s expenses until the borrower’s next payday. Put in other words, a PayDay loan is a “short-term, high interest loan used as an advance against your net paycheck.” They are usually paid out within 24 hours of application, making them an attractive option for people needing cash in a hurry.
PayDay Loans are frequently referred to as “Payday Loans Traps” or “PayDay Loans Scams”, due to the compounded debt effect they so often produce. The trap is essentially this: a consumer takes out a payday loan to cover expenses during a month in which his paycheck just does not stretch far enough, with the intention of paying the loan back as soon as his next paycheck comes in. However, the reality is that he needs to then pay this loan back with significant interest, and finds that when he gets his next paycheck, it stretches no further than the one from the month before, The amount he owes then begins to roll over from month to month, gathering exorbitantly high compound interest as it goes. Before you know it, he is paying heavy fees each pay day just to service the interest he has accumulated, but continues to sit with a large and ever-increasing debt. (www.paydayloner.com)
Having been warned of the pitfalls of this quick-fix scheme, our advice again is run – fast from the Payday loans trap. However, if you are determined to obtain finance, ensure that you know the facts, and that you approach a credible lending institution, so as to minimize your risk as well as the inflated interest that could accompany the loan.
A PayDay loan is available as a secured or unsecured loan, depending on the lending institution you go through. (www.getloansonlione.co.za) Note that banks rarely offer PayDay loans, so it generally falls to online loan providers, many of whom are running very profitable scams off of unsuspecting consumers in need of some quick cash. Most providers will need some proof of the fact that you have a regular income, and will also need proof that you are a South African citizen, and are over the age of 18. Some will run credit checks, however there are a multitude of offerings on the Internet claiming “no credit check needed”. Again – be wary of this, as the “terms and conditions” related to these loans, along with the interest rates charged, can quickly cripple consumers who were already struggling financially.
The bottom line is that PayDay loans act as a shining beacon of hope in untenable financial situations – however that shining beacon of hope quickly turns out to be a death trap, alluringly packaged. Currently it is not uncommon for PayDay interest rates to be up to and over 100% of the value of the original loan, which has a significant impact on the amount needed to be paid back.
If you fallen prey to the trap, make sure you pay off as much as you can each month. “Paying a little extra can make a huge difference when you are being charged interest rates in the triple digits.” However, to ensure you don’t fall into the PayDay loans snare in the first place, run fast in the other direction, all the while remembering that quick fix loan schemes are almost never as easy or as straight-forward as they appear to be.