Archive for April, 2011

« Older Entries
Newer Entries »

Pros and Cons of Using Payday Loans

Friday, April 22nd, 2011

Some consumers automatically go for payday loans for their urgent need for extra cash. However, you must remember that not all emergency cases or financial woes can be solved by this short term credit option. Payday loans, which are also known as cash advances loans, are short term credit options that serve as reliable sources of instant cash.

Consumers can draw funds upon filing of loan requests. Funds are normally released within a few minutes or hours. However, you have to remember that this short term credit option runs for just a couple of weeks or up until 31 days. This means that you need to carefully determine the amount that you can afford to borrow to avoid any complications or problems when your payday loan falls due.

Key Advantages of Payday Loans

  • Simple and Easy Processing of Loan Requests

    • Leading and established online payday loans lending companies can process loan request and release funds within minutes. This is made possible through the adoption of a simplified procedure in the processing of loan applications. In fact, you can apply for a loan without having to go to the payday lending stores in person. If you don’t relish the prospect of being seen in such places by other people then you have the option of applying for a loan through the online facility of the payday lending company.

  • Credit Rating is not a Requirement

    • Consumers need not worry about their low credit score as credit rating is not a requirement by payday lending companies. This is one of the main reasons why lenders are able to process loan requests and release funds within minutes. However, you must not abuse this privilege and become reckless when you avail of payday loans. You must remember to use the funds drawn from such form of short term loans only for the intended purposes. For instance, you must not use payday loans to settle existing loans as this unsound practice will ultimately lead to debt cycles.

  • Lump Sum Payment and One-Time Charging of Service Fees

    • You don’t have to worry about recurring service fees and charges. Payday lending companies apply a one-time service fee for the borrowed funds and you only need to make a single payment upon maturity of the payday loan.

Disadvantages of Payday Loans

Obviously, we tend to look at the APR when it comes to the downside of payday loans. However, this variable is not a precise measure when it comes to the cost of the loan. This form of short term loan only runs for a couple of weeks or 31 days at most and it would not be entirely accurate to look at the annualized cost of such loans.

Another downside of payday loans is the short repayment period. Some consumers may encounter difficulties or problems in repaying the loan within a couple of weeks. Unlike the traditional loans which are paid in installment, this type of short term loan must be paid in full. Thus, you should make sure that you are in the position to repay the loan before you make your loan request with the payday loans lending company.

Tags: , , , ,
Posted in Payday Loans Information | No Comments »

Advocacy Groups Position on Payday Loans Scored

Monday, April 18th, 2011

The Center for Responsible Lending has recently come up with a highly critical view against payday lending.  While we may not question the sincerity and commitment in advocating a more responsible and fair lending practices, there is still a need for them to observe discretion when making pronouncements that tend to muddle the issue and mislead consumers. Unfortunately, some quarters believe that this was the implication of the recent pronouncements made by the CRL.

The CRL is raising the alarm over payday loan’s “unconscionable” level of APRs. Their argument is anchored on the excessive cost of this type of short term loan as evidenced by the high APR which ranges from 300 percent to as high as 500 percent.  CRL claims that consumers will most likely drag themselves into their own debt traps if they avail of payday loans. The group even went as far as recommending that punitive measures be undertaken to curb what they call as “predatory practices” by payday lending companies.

Time and again, this issue about APR and payday loans have been clarified and dispelled by experts and for CRL to raise an alarm over the same issue leaves a bad taste in the mouth. The group is making a mountain out of a molehill. This tendency to use APR in vilifying payday loans is really unfortunate. When we say that payday loans are utterly expensive by citing the 400% APR, what this actually means is that the actual cost of the loan is around 15%.

Well, these critics of payday lending conveniently fail to mention that APR is the annualized measure of the cost of loans. We are well aware of the fact that payday loans are only good for a couple of weeks or 31 days at the most. The actual cost that consumers will have to shoulder is around £15 for every £100 that they borrow from the payday lending company. It is all about the issue of time reference. These groups that are against payday loans are literally creating a smokescreen when they resort to APR in justifying their position.

The APR can be applied under this condition. If a consumer takes out a payday loan and decides to roll it over for 26 times then the effective rate of interest would amount to 400%. The truth of the matter is that the average term of payday loans in UK is around two weeks and we seldom encounter cases where the term of such short term loan is extended beyond 31 days. This means that APR is not an accurate measure of the cost of payday loans. A precise measure would be the actual or nominal cost which you have to pay the lender for such financial relief. In fact, financial experts suggest that consumers look at the incremental benefits that would accrue them when they avail of such funds.

Payday loans are never meant to run for more than a month and to anchor arguments on APR is totally inaccurate and downright irresponsible. UK consumers consider payday loans as their best option when they are in dire need of extra funds.

Tags: , ,
Posted in Payday Loans Information | No Comments »

Indicators Pointing to an Economic Upturn – Impact on Payday Loans

Thursday, April 14th, 2011

UK consumers continue to struggle with their expenses despite pronouncements by economic experts that the economy is on the uptick. Results of a recent national survey that was initiated by the Bank of England involving some 2,000 UK households indicate that more than 50 percent continue to struggle in the repayment of their credit card and other forms of debts. In addition to this, 1 in every 5 respondents confirmed that they had to cut back on their expenses because of their concern about their precarious financial position and the apparent difficulty in accessing financial relief from regular fund sources. This largely explains why we are seeing an increase in the number of UK consumers applying for payday loans.

The survey also revealed that 90 percent of the respondents expect their situation to become worse amid the planned implementation of austerity measures by the government. However, less than 50 percent of these respondents have taken action to alleviate their financial woes as a result of such budget cutbacks, including possible increase in their savings portfolios or increase in their disposable income.

Almost half of the UK households that were involved in the national poll expressed their serious concern about their credit load. Majority of the respondents admit that there is an increased concern about their debt over the last couple of years. UK consumers admit that they are now encountering some difficulty when applying for loans with banks and other financing companies. In fact, more than half admit that credit availability has gotten worse in the last few years.

This is the main reason cited by an increasing number of UK consumers why they are going for payday loans for their short term need for instant cash. Payday  loans lending companies offer the most liberalized processing of loan requests and release funds within the day that applications are filed.

Tags: , , ,
Posted in Payday Loans Information | No Comments »

« Older Entries
Newer Entries »