Category Archives for "Payday Loans"

Payday Loans vs Credit Unions

There is an increasing number of people that believe in Credit Unions replacing Payday Loans in this war in lending business. Whether this is true or some kind of fiction is exactly the thing I want to discuss in this article. We all know everything that there is to know about payday loans, but our overall knowledge into credit unions is somewhat small, and due to that we will place our focus on credit unions and we will input some comparison with payday loans in it.

Establishing-creditCredit union

Credit union is made out of people who join together in order to provide current and saving accounts and loans to all its members. In many cases there is some kind of connection between members of the same credit union. Credit unions offer loans to its members, somewhat similar to online payday loans sites that connect borrowers and lenders, but in this case it is between trusted members of the union.difference-between-payday-loans-vs-credit-card1

There are many advantages of joining these unions rather than taking payday loans. People with low incomes prosper from these union, same people that would have taken payday loan if they had no choice. Interest rate in loans from these credit unions is a lot smaller than payday lenders offer, and other conditions of the loan are also better. For example in credit union they might give you extension on repayment of credit union short term loan, and it will not cost you anything, while on the other hand payday lender might extend your loan if he or they feel like doing, but that will cost you in either increased interest rate or one fixed payment for the extension.

Credit unions have existed for quite a lot of time, but they were not as popular as they are now. Their popularity is still growing and companies and organizations have big influence in that. Credit unions don’t have aggressive advertisement programs, and due to that majority of people are unaware of their existence and their benefits.

Payday lenders

In last few decades number of people that god indebted to payday lenders is high. Some of those people get very high debts which makes them quit job credit-cards-cashand search for higher sources of income in order to repay those debts. This is inconvenient for both workers and their companies. The companies don’t want unhappy workers who fail to do their job due to stress caused by unpaid payday loans. Since the number and size of credit unions increased those companies arguing their workers to become a part of one such union.

This is done to benefits of both parties. Workers will have a source of loans which will not strangle them with high interest rates and unfair conditions of loan repayment and companies will have workers that are free from payday loans clutches and they will be able to focus on their work.

So, I would say that credit unions are a lot better than payday loans, but the number of credit unions is fairly low, and right now not everyone can become a member of one.

What Is A Payday Loan?

What Is A Payday Loan?

Today’s financial situation in the world can be described as rather difficult and questionable, where people are trying to make ends meet and to balance their budget daily. Poverty and loss of jobs have become major problems and people are trying to earn only for basic essentials. They have been forced to take all sort of loans in order to survive, banks usually take those kinds of situation into their advantage and impose them high interest rates. The real question here, are we becoming the slaves of the bank, trying to return loans which force us into a greater debt?

What a payday loan represents?

This loan is made for short usage, which means you can borrow it over a short amount of time. Companies for payday loans usually use typical commercials to advertise them as means to fund shot notice purchases, at the end of the month, before pay check arrives, when everyone is short for the money. Unlike traditional loans that you will be paying off for years these loans are arranged over days and they are used as a means to overcome a gap between two salaries.

How much are you allowed to borrow?

Mostly, these loans go up to 2000 dollars, but some companies will limit the amount of the first loan. The period of time in which you are obligated to return the money is between few days up to a few month and these conditions vary from lender to lender. Some of them will offer you five days, while others five months. What’s important to mention about these loans is that lender will calculate you interest on daily level.

How big the interests are?

Let’s just say they are pretty big.  You lend a loan in amount of $200, that you are obligate to return in 14 days, when that term expires, you will owe to a lender approximately $234. If in your account the lender doesn’t finds required mean, he will charge you additional $20 for late payment. If you seek from a lender to extend that period for additional 14 days and that someone repays the loan instead of you, you will own $275. Even if after that you don’t find the means to repay a loan, he will grow up to a $368.

Why are they so questionable?

There are lot of campaigns now days against these companies that offer payday loans. Because the interests are usually quickly add up. The lenders target borrowers who are extremely vulnerable, without checking their salary balance, before they allow them to use a loan. After the borrower uses the loan that he isn’t able to repay in designed time. Not many of lenders are happy to help him out and to enable him decent conditions to return the money.

Is the criticism justified?

We are required to mention that these companies made number of omissions, regarding a payday loans and some of the researches may contribute to that. Mainly because borrower wasn’t obligated to provide documents, whether they are in position to seek and return a loan. Another omission is that interest rates aren’t been enough transparent, so the borrower can’t really know want to expect.

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Payday Loans

How Payday Loan Companies can Educate Consumers

While payday loans have been around for some time now, it is still a relatively new concept for most of the people on this planet. This means that it is extremely important to educate consumers about what these loans are so as to bring about general awareness. There are many concepts in payday loans that consumers should ideally know about. So that they can benefit from them completely.

A few ways that payday loan companies can educate consumers

1.     Create comprehensive websites

Payday LoansCompanies offering such a service need to make sure that their websites are updated with all the relevant information regarding payday loans and how they can acquire them. Payday loans are indeed quick to access and the application can be sent online. However, if consumers do not know about this, then it is highly unlikely that they will go with this option. In addition to this, companies also need to make their consumers aware of the maximum amounts. That they can acquire at a single time through their service.

2.     Offer proper client servicing

While the entire process is quite simple to understand, people who are new to this might experience some difficulties while accessing this service. For this reason they might benefit from speaking to customer service representatives who should ideally be available to them 24/7. This will ensure that what questions the customers have are answered immediately.

3.     Hold seminars

Payday loan companies can also consider holding seminars for the sole purpose of educating everyone around on what payday loans are and how consumers can access them. This is especially important in countries where the concept is new and people do not know about these types of loans at all. In addition to this, you can give out pamphlets covering this topic in detail so that people understand what these loans are all about.

4.     Create awareness regarding the basic principles of borrowing

If the borrowers are ready to borrow money, then they should also have awareness regarding the basic principles of borrowing. Here are a few basic principles that need to be considered at the time of borrowing:

  • It is not feasible to borrow than you have the affordability of paying back. When emergency situations arise, people do not often have the ability to think clearly, and they then tend to take out more than they can afford to pay back.
  • Only deal with one lender at a single time. This is primarily because taking multiple loans from many lenders will lead to you having to deal with different interest rates and you would have to remember individual repayment dates.
  • Carry out a comprehensive research before you go for any kind of loan. This includes looking into the different lenders and their individual fees and rates.

Educating consumers on all aspects of borrowing and payday loans is extremely important so that consumers do not at all feel hesitant when the time for borrowing a loan comes.

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