Payday loans ? What are Payday Loans ? Payday loans are short term unsecured loans to tie you over to your next paycheck. They are generally small loans for a period of 2 to about 40 days. The nature of these loans make them expensive due to the high risk attached. These loans are normally granted on the spot with the cash available immediately.
Payday loans benefits
- Cash is available immediately
- Easy loan application process
- Loan Approval is almost instant
- Minimum or no documentation required fro the loan application
Payday loans disadvantages
- Payday loans are an expensive form of credit.
- High fee structure compared to the loan value.
When & why should you consider a payday loan
These loans should really only be considered in a financial crisis. They are great to cover immediate emergencies which were not budgeted for.(Sudden illness, Death or maybe another emergency which required an immediate cash advance. If you have the option of time you should rather consider different finance options.
Don’t consider using a payday loan to pay for those new boots or that quick holiday. You will regret it for the rest of your life.
A break down of cost and fees for payday loans
- Admin Fees of R57,00 inclusive of VAT are charged
- Loan Initiation fees of up to 15% or R1000,00 can be charged
- Interest rate at 0.17% per day
The above fees are the fees as set out in Chapter 5 of the NCA no.34 of 2005
In short, payday loans are great to meet any immediate financial crisis but they are expensive. It is sometimes the only option for people with no credit or bad credit as it will be difficult for them to get loan from bank or financial institutions.
You should always do your homework before choosing a lender and payback the loan on time to avoid unnecessary costs & fees.