Nov 27, 2012

Payday Loan Companies Mock at the Law

For the working class, the ability to pay off monthly bills, and having just enough at the end of the month is bliss. More and more families are having a difficult time just making ends meet, and not having any debts poured over from the previous month is a normal target. The problem is, not every day is perfect. There are those days when their card needs repairing, or when a credit card bill is forgotten. During those circumstances where time is of the essence, payday loans are often the quick and easy solution.

Payday loans online is almost an immediate answer to emergency money needs. If you have a computer, a stable job and a bank account, your request may be approved in a matter of minutes. However, this easy and fast approval is also the very reason why it can be easily abused by loaning companies.

More and more people are highly reliant on payday loans in order to survive their finances. And because of the high and growing demand, there are many in the industry who present terms that are opaque and vague. One of the reasons to be blamed for the constant trespass of these companies is the lack of regulation from the government. Yes, there are certain efforts to create a system, but many of the legitimate companies have also complained that the proposed terms are damaging to the industry, and lacked the proper consultation with the existing legal players. Because their existing market is often those who are in a vulnerable state, a swift but well thought of measure should be followed.

Tightening the credit industry’s code of practice will only mark a huge dent on those who rely on legal payday loan firms. When other credit options have a very strict requirement list and government assistance is an impossible feat that would lead to individuals falling into the mercy of loan sharks and illegal payday loan companies.

There are certain factors to look for when weeding out the illegal credit companies from your list. Payday loans always have a higher interest rate compared to other loans because of the fast processing and the maximum risk for the lender. Because of this, you shouldn’t compare payday loans and regular loans based on the APR’s (Annual Percentage Rate). The payday loans are often limited to just one month, therefore, you can expect that the projected APR is leagues higher compared to the others. What you do have to look for though is transparency. Legal credit companies will specify exactly how much percentage you have to pay on your due date, and the additional charges should you miss the payment. This may be on a monthly or daily calculation, but you should be provided the information freely.

Illegal companies that offer payday loans online often have the same easy and fast processing, but only inform you of the interest you build up on your due date. The additional charges you incur for missed payments are often very vague or even missing altogether. If you miss fully comprehending the terms they provide, or agreed to the loan even with the missing information, they can get away with overcharging you and you are legally obligated to pay for those fees.

So now you know that payday loans have a higher interest rate than your usual bank credit. How do you know if you’re in a desperate position where the loan can alleviate your finances, or just dig your financial grave even deeper?

Only take on a payday loan if:
1. You issued a cheque that is about to bounce.
2. Your alternative loan is long term, and you have the ability to pay in a few weeks.
3. You have an incoming bill that will lead to your credit going over the limit and charging you with a huge overdraft.
4. You are unable to convince your bank to authorize a cheaper overdraft.

Those given above are the usual scenarios where payday loans are the practical choice. You should remember that there are some loan firms that simply take advantage of the fact that you are overly reliant on loans. If you just happen to be short on your day to day expenses, or if you need a loan that could take you months to pay, look for other options. Cut your expenses or go to the bank for a better deal. Payday loan companies may be able to go around the law, but if you’re careful and properly advised, you’ll be able to stay off their list.

Mackenzie Salis is a finance writer for 3 years. She is the author of the site: http://www.onlinepaydayloansguide.com that can provide all valuable information about loans and warn you against fraud and swindle.

No comments:

Post a Comment