What You Need To Know About Payday Loans
If you are planning to take out a payday loan, beware! It can be very expensive. If you couldn’t repay a payday loan on time and in full, its costs can soon skyrocket making it a matter of huge stress for you. Therefore, only if you are sure that you can repay it in full and on time, consider taking a payday loan. Still, if you are interested, here are some facts you should know.
What is a Payday Loan and How can You Take it Out?
A payday loan is a short-term loan basically meant for helping people out in their difficult situations until their payday.
The loan amount is transferred directly to the borrower’s bank account and the borrower has to repay it in full and with applied charges and interest at the end of the month.
However, a payday loan can be borrowed even for three months or even more and can be repaid in installments.
The factors common to all payday loans are their high cost, short term and usually small amounts.
The normal process is that you get time till your payday to repay the loan and the interest. However, some lenders allow you to choose the period for repayment.
As mentioned earlier, a payday loan is costly and could cause you a lot of stress if you cannot repay it on time. You should think carefully before opting for a payday loan.
Costs of Payday Loans
The payday loan costs are capped by law, as per the rules set by the FCA (Financial Conduct Authority).
The rules put a limit on the amount of default fees and interest you can be charged.
A loan for 30 days should not be charged with fees and charges more than £24 per £100 borrowed. If you couldn’t repay on time, the maximum amount charged to you in default fees is £15 in addition to the interest on your loan amount.
An overall cap refers to the fact that you will never repay more than twice the amount you originally borrowed.
Take a payday loan from a reputed lender; thus, No teletrack payday loans are a great comfortable option and you are protected from fraudulent lenders.
Several payday lenders ask the borrower to set up a recurring payment or CPA (continuous payment authority) before approving a loan. With this, they can withdraw the amount you owe them straight from your bank account on the repayment date through your debit card.
This may seem useful, but actually is risky. You may not be left with sufficient amount in your account to pay other bills, including rent, mortgage or other necessary expenses such as food, fuels or energy. In addition, it can make you cross your overdraft limit, resulting in bank charges.
If you don’t find a CPA comfortable, you may ask the lender for other ways if any.
A CPA can be cancelled any time. But the fact remains that you owe the amount to the lender and you should repay it on time in another way.
Saving Yourself from Payday Loans Trap
If you are finding it difficult to pay your payday loan back, your lender may try to lure you to take an extension called rollover or a deferral. They may even lure you to take an additional loan.
However, there is a limit on how often they can roll over a loan and they should provide you an information sheet every time with the details of free debt advice providers.
A rollover may seem a great solution; but it can soon become problematic, since you will need to repay a lot more interest as well as other fees and you could end up with difficulties in paying for the essentials.
Still, if You are Planning to Get a Payday Loan
If so, plan carefully about how you will repay.
If you are feeling shortage of money this month and thinking of taking a payday loan, first think on if you will get the money plus interest the next month. Will there be any extra income? Or will you cut back seriously on expenditure?
Look for if there are other alternatives and if a loan that is to be paid in installments might be a better option.
Still if you decide to take a payday loan, make sure the lender is regulated by the FCA (Financial Conduct Authority) like the No teletrack payday loans.
14-day Cooling-off Period
And if your mind is changed, you can withhold to continue with the agreement any time within the first 14 days. If you do that, all you have to pay is the interest on the credit used. You will get the refund of any extra charges.