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Discover The Operation Behind Payday Loans

Written By wafa gurape on Senin, 30 Desember 2013 | 20.28


Payday loans can be referred to as the money advanced to a borrower which is paid in full on his next payday. This is where the borrower promises to pay the loan when he or she receives the next payment. The interests charged on these loans are usually higher than other loans.

Other lenders may require the borrower to give them his personal post dated cheque before they advance the loan. Usually, the cheque amount includes the loan advanced plus the interest charged. This article aims at highlighting several features of payday loans and why borrowers prefer the product.

Increased Demand for Payday Loans

There has been an increased demand of these loans in the market as of late.

Consequently, many lenders have emerged to cater for the ever increasing demand for the services. To secure the reliable market share, lenders develop attractive terms of the payday loans to lure the borrowers to their products.

The law requires the lending institutions to make full disclosure on the annual percentage rate (APR) charged on payday loans they provide. The APR can appear very high, although this is claimed to be misleading by lenders.
Because the APR is a figure that represents a loans interest over the course of a year and these loans are repaid over not more than 1-month. The figures can be conflicting.

This ensures that borrowers are aware of what is expected to be paid back. The rates of interest charged on the loan vary with different institutions. These loans have several advantages which make them suitable to many people in the market.

Why Choose a Payday Loan?

These loans are easier to access than other loans. This is because lenders do not require the borrower to present the collateral as a security.

These loans are treated like unsecured personal loans but the only difference is that they are paid in a single installment.

The credit rating of the borrower is not considered when advancing these loans. This enables the borrowers with poor credit rating to access the product.

The borrower is only required to prove that he is in position to pay the loan with his next salary.

How Technology has Changed the Face of the Market

Most of the lending institutions in the market have adopted the use of advanced technology. This enables the borrower to apply the loan online. The lender provides an online form for the borrower to complete and submit in the same way. This process saves a lot of time since it can take less than five minutes to complete.

The loan is approved within the shortest time possible. After the approval, most lenders advanced the loan instantly directly to the bank account provided during application.

This makes the loan suitable for sorting out emergency cases like settling hospital bills.

Several Factors to Consider

However, there are several criticisms leveled against these lenders. These includes exploitation of low income earners by charging them high interest rates, some do not comply with legal provisions among others. It is therefore advisable that borrowers should consider several factors when seeking this kind of a loan.

The borrower should consider the interest rate charged on loans which should be reasonable. The legal compliance of the lender should also be considered to ensure that there is no exploitation. The method of debt collection should adhere to the legal standard.

All these can be known by making a thorough comparison among many lenders in the market. This will enable the borrower to make a suitable and reliable decision in regards to the on line pay day cash advance provider they engage.
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