subject: Payday Loans: Pros And Cons [print this page] Many people rely on payday loans to get them through emergencies and through tough times when they are running low on cash. They have the advantage of being readily available and at short notice even to people with a history of bad credit and they do not require collateral for approval.
The high interest rate that is normally charged by payday loan lenders is, however, a major cause of concern for majority of the people who would wish to get one. The interest rates are usually very high reaching up and over 300%. In the past this has brought payday borrowers a lot of problems especially in cases where they have been unable to pay back the loan within the stipulated 31 days.
Due to the high interest rates, payday loans extending beyond one month tend to more often than not spiral out of control and sink the borrower into deeper debt. This trend is, however, getting reversed due to the increased competition brought about by an increase in the number of payday loan lenders in the market. Lenders are being forced to reduce the interest rates charged in order to attract more customers.
The increased competition has also brought about another advantage for payday loan seekers in the form of various incentives being offered by payday companies in an effort to attract customers. Some payday loan lenders will lend you the first loan on interest free terms. For lenders offering this incentive the loan remains interest free on condition that it is paid within 31 days. Beyond that point interest will be charged.
Another incentive being offered by payday loan lenders is allowing the customer to pay off the loan in multiple payments instead of the usual single payment required by payday lenders. A multiple payment plan allows the customer to pay back the loan in two to four installments.
Payday loan lenders have also had to increase the ease with which customers can apply for and get the loan. Currently you can apply for a payday loan online by filling a simple form and submitting employment records. The loan is approved within hours and directly deposited to the customer's bank account where they can access it within a few hours.
With all these incentives encouraging customers to apply for a payday loan to deal with their small cash emergencies one needs to be aware of some of the problems that they may encounter as a result of borrowing a payday loan.
Pay day loan lenders have often been accused by quite a number of borrowers of charging unfair charges and harassing or in some cases threatening customers who claim to have cleared the agreed payment. Most states have regulations limiting the maximum amount of interest that a payday lender can charge on the loans but this has not prevented lenders from coming up with new ways of going around this regulations.
This has lead to Consumer Protection B.C requesting people who feel that they have been charged unfair charges by Cash Store to register with them for a refund. The consumer watchdog reports to have received almost 400 complaints about cash store. In March 2012, Cash Store was ordered to refund its customers additional fees that they had charged under the cash card lending mode.
