Securing a loan online at the weekend
A payday loan refers to a short term cash advance given to a customer and it is secured against that customer’s next pay check or salary. This type of loan is mostly provided to salaried consumers who have some employment history. The laws governing or controlling payday loans vary all around the world. The payday loaning practice continues to receive a lot of controversy and keep facing both legal and social challenges. However, it has both its merits and demerits.
Payday loan process
The process is very simple compared to other methods such as bank loans, even on weekends. The lender gives a short term loan which is unsecured to a borrower. The loan is to be repaid when the borrower gets the next pay cheque. The lender may verify the borrowers employment or income.
In the more traditional model, when the borrower gets a payday loan, he/she writes a post dated check to the lender which covers the full amount of the loan and also the fees chargeable. The borrower is expected to go back to the lender when the loan matures (pay day) and pay the loan plus fees charged. If this does not happen, the lender can redeem the check that the borrower wrote when getting the loan.
For online payday loans at the weekend, the borrower fills the loan application forms online and the cash is then transferred to his/her account digitally and once he/she receives his/her pay, the loan amount plus fees are withdrawn automatically from his/her account
Merits of payday loans
- The process is fast and readily available
Once a consumer needs a payday loan, the processing is very fast; it can even take 30 minutes and the borrower has the money in the account.
- Helps in cases of disaster
When disasters strike a certain area, people with access to readily available payday loans have higher chances of recovering than those without. Also in cases of emergencies like sickness, the borrower gets quick access to money needed for treatment.
- Helps in improving the household welfare
Payday loans can greatly help in improving a household’s welfare as they are readily available and without stringent measures.
- Optional credit available where other options are not available
If a borrower has exhausted other credit avenues, he/she can always opt to get a payday loan which is readily available as long as it can be paid with the next pay check.
The bad side to online cash loans
- Exploiting the financial restraints of the poor for profits
Most payday loans lenders target the poor and the young who are undergoing hardships from one pay day to the other. They lend them money at high interests and pocket the high profits. This also drains the low-income communties as the borrowers are unable to save once they receive their pay. They instead use it to repay loans and the high interests and in the end get into a debt-cycle.
- Aggressive collection ways
Default rates in this business are very high (in the range of 10-20%). Therefore, in many cases, lenders are forced to use aggressive ways of collecting the money owed to them such as threatening the borrowers with check fraud where borrowers issue post dated checks but their accounts dont have enough money
- High interests that go against the legal restrictions
Most payday loan lenders charge very high interests ignoring the legal restrictions set.
In conclusion, lets say pay day loan lending is a component of our day to day lives and just like most other things in the world, a necessary evil!