Understanding How Payday Loans Work
Before taking out a payday loan, it is important that you understand what it is and how it works. You might assume that all loans are basically the same, but payday loans have specific qualities that make them different from other forms of credit.
What is a payday loan?
A payday loan is a small, short-term type of credit that must be paid back by the borrower on the next salary date. It is somewhat similar to a cash advance that you get from an employer.
How much can I borrow?
This usually depends on the lender and your income. In general, the amount a lender will grant you is based on how much you earn. It can also vary based on a lender’s criteria. If you do decide to get a payday loan, make sure not to borrow more than what you can afford to pay.
Will I be qualified for a payday loan?
As long as you are employed or receiving benefits, and meet the basic requirements of the loan provider, you can be granted a payday loan.
How soon can I get the funds?
You can expect to receive the loan proceeds in a day or even a few hours if you took out a payday loan from an online lender. Payday loans are typically easy to get so it’s a great solution for emergency financial situations. Can I get a payday loan if I have bad credit? Yes, online lenders cater to borrowers with good, poor or bad credit.
Sometimes, when people are in such a desperate need for cash, they end up borrowing from whichever lender will grant them a loan. Unfortunately, there are instances when they might fall into the hands of some shady ones- the loan sharks. Usually known for targeting families with low income who are desperate for cash, they might seem like the friendliest blokes in town but below are some reasons why doing business with them is a bad idea.
Beware the friendly lender
Loan sharks are illegal lenders. Their questionable practices have led them to resort to intimidation and even violence to the unfortunate souls who made the mistake of dealing with them. They will usually start out friendly and most of the time, they stay that way as long as you are keeping up with your payments. However, the money you do borrow from them are charged high, with recent reports revealing that some of them have even attempted to charge as high as 719,000% for interest rates alone. Despite this though, many people who are at their wits' end due to unexpected financial need can still fall prey to their schemes.
How they operate
The exorbitant fees which they subject their borrowers is what differentiates them the most from other legal lenders. The worst part is that they may harass and threaten you in the event that you pay late. As a result, many of their borrowers get pressured into borrowing more just so they can repay their old loan with another credit. This can lead to a vicious debt cycle that is just impossible to pay. These lenders are unlicensed and are not regulated by the FCA or the Financial Conduct Authority, and as such, they operate outside the low.
What to do if you borrowed from a loan shark
If you have ever borrowed money from these unscrupulous lenders, you are not obliged by law to pay it back. They are not licensed to operate in the first place and hence, have no legal authority to get you to pay them back. Sometimes, they might intimidate people by threatening about getting them prosecuted. They cannot do this though since it cannot be considered a criminal offence to not repay the loan as they are operating beyond the legal means in the first place. If they keep harassing you, the best thing to do is to report them to the authorities.
If there ever comes a time when you need to borrow money, take the time to find a licensed, legally operating lender. While it may be a challenge to get a loan when your income is low, there are licensed and reputable lenders that will still be willing to loan you money. The best way to deal with loan sharks is to never associate with them.
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The payment is sent immediately to your checking account upon approval. So there’s no need for you to visit banks to get the money that you have requested. It will be deposited to your account within minutes after being approved.