Online payday loan became so popular that up to now several million Poles have used them. Doubts about payday loans, however, can be caused by quite high costs, especially when compared to bank loans. Such amounts have some justification and you should read it well before you reach for payday pay.
Loans without certificates are a big risk
All borrowers must be aware that payday loans are a risk. But not only for the borrower – the loan company also risks its private capital. What it comes from? Very often it happens that loan companies go to people who have not received a loan from the bank, so probably their financial does not look good.
In addition, a large number of companies do not refuse to grant loans to clients who have a negative history in BIK and even appear on debtors’ lists. Loans without BIK or loans without KRD are not so rare, but they expose the company to the fact that the customer will not return this loan and its recovery will generate further costs. So it can be said that those who pay loans pay on time.
Debt is a huge loss for a loan company
Non-bank institutions do not have great tools to recover liabilities. Some of them do not have their own debt collection departments, while in others debt collection is quite limited and usually ends with reminder actions. Therefore, as a last resort, they resort to selling the debt to an external debt collection company for a fraction of the amount due. It is therefore profitable for them to introduce quite high fees for extending the repayment period and commission fees. Let us remember that loan companies do not work for charity, and their main task is to earn money – it is important, given that many people do not pay payday loans, showing significantly less respect than in the case of bank loans.
How does the APRC translate into reality in payday loans?
The APRC is considered to be the most reliable indicator when it comes to assessing the actual cost of a loan. If you compare a payday loan with an installment loan – in the same amount and with a different period of time – the payday loan looks really pale when it comes to APRC, which can soar up to almost several hundred thousand percent. But if you think, you’ll find an easy explanation for that number, and then the costs don’t seem so high anymore. It should be remembered that the APRC is calculated annually and the money from the payday pay must be returned very quickly, usually within 30 days, and less often – 45 or 60. This is a very short period – and the lower it is, the higher the APRC is which does not translate into real costs. This indicator is very difficult to calculate, and for people who do not turn around in the financial environment is very hard to read – a payday payday with the APRC of several hundred thousand can cost up to several dozen dollars.
If you want to choose the most favorable payday payday, you should first of all compare the APRC for the same amounts and the same repayment periods. However, it will be easier to use a loan comparison engine, which in addition to APRC will also indicate the specific amount of total costs – in which case the comparison is already obvious.
What costs are included in payday pay?
Most people know what the charges are for, but there will be borrowers who have little knowledge of costs and the APRC tells them nothing. This is mainly due to the fact that a large percentage of borrowers are interested only in free payday loans, so they consider that they do not need to have such knowledge. However, in the event of non-repayment, it ceases to be free. So let’s get acquainted with what you may be charged for:
- Verification fee – usually $ 0.01 and is used to verify the customer’s identity. Sometimes it is a refundable fee and it is returned to the borrower’s bank account.
- The interest rate is a fee that the borrower must pay for “freezing” the company’s capital for some time – the company cannot trade the money borrowed, so it is a loss for her. The interest rate cannot be higher than 10%.
- Commission – a fee for granting a loan due to a loan company, depending on the repayment period and, naturally, the amount of the loan.
- Extension of the repayment deadline – the fee is of course optional and due only if the borrower is unable to pay the loan on time and would like to postpone the payment for some time.
- Refinancing – as above, this fee is not mandatory and payable only if you want to postpone the repayment date.
- Dividing the payday loan into installments – this option exists only in selected companies, but even then it is only permissible if the customer has already used the option to extend the repayment period, and some time has passed since the deadline.
Under the Anti-usury Act, the total cost of the loan may not exceed 25% of the loan amount and 30% of these costs per year.
We pay for convenience, but this does not release you from liability
Admittedly, some of the borrower’s costs also stem from the fact that the way a loan is taken really couldn’t be easier. We haven’t used this facility as a service, though it is. Every loan is a risk and you always have to re-calculate it before you take it.