Payday loans are short-term loans for a modest sum of money that can be repaid immediately. They can be purchased at stores on the high street as well as online. Even while payday loans are simple to obtain, their APRs can be sky-high. Consider other options before taking out a payday loan to solve your short-term financial difficulties.
Be sure to browse around and compare interest rates and fees before taking out a payday loan. Consider the consequences of payday loans if you can’t pay back the money you borrowed. This content explains what the lender needs to do before they provide you a payday loan, how you repay the loan, and what happens if you can’t even pay.
Think twice before going for a payday loan
Shop around for the greatest price possible. You should be able to compare the rates offered by different online payday lenders if they are listed on at least one price comparison website. The Financial Conduct Authority (FCA) must regulate the price comparison website.
You can check if a price comparison site is regulated in the Financial Services Register. As a general rule, it’s best to use the company name rather than the website name when checking.
Before giving you any money, a lender should verify that you can pay it back when you ask for a loan. This means, for example, that the lender should evaluate whether or not you have enough money coming in each month to repay the loan. You can use your loan for anything you like, even to buy a moped for sale.
The lender should also go over the important aspects of the loan with you, such as how much you’ll have to pay back, what happens if you don’t make your payments on time and that the loan isn’t meant to be a long-term investment. The lender needs to clarify how CPAs function and how they can be canceled.
‘Late repayment can cause you serious money issues.’ must be included in all payday loan advertisements, including those sent through email or text message.
Payday loans have a daily interest rate cap of 0.8 percent as of January 2, 2015, and no borrower should be required to pay back more than twice what they borrowed.
Paying back
Most lenders will let borrowers pay back the money they borrowed, plus interest, within a month.
Using your debit card to pay back a payday loan is the most typical method of repayment. To secure the loan, you agree to allow the lender to withdraw money from your bank account on a predetermined date. Continuous payment authority is what we’re talking about here (CPA).
If you can’t pay back the loan on the specified date because you don’t have enough money in your account, the lender can keep pestering your bank for money. Late fees will be charged to any outstanding balance.
Extending time
Taking out a second payday loan an extended repayment period may be offered by your lender if you are experiencing difficulty repaying your debt. For example, if the lender gives you more time to pay back the loan or extends it, this could be done. In order for a rollover to work, the original loan must be repaid in full. If you agree to prolong your loan or allow it to be rolled over, you will be charged more interest, additional fees, or other additional charges by the lender.
Your loan should only be extended by your lender a total of two times. In addition, when a lender extends a loan, they are required to provide you with a page of information outlining where you can get free debt counseling. For those who find it difficult to make ends meet or repay debts, professional assistance may be of use to you.
Wrap up
It’s important to note, though, that your lender shouldn’t utilize the CPA more than twice, and they shouldn’t try to make a partial payment. However, analyze the situation properly before taking payday loans.
