Payday loans or cash advance loans or fast cash loans offer short-term financial relief to the consumers who are not able to obtain money traditional institutions easily. The lender credits a certain amount in the checking account of the consumers electronically. In return, consumers send a post-dated check to the lender. Consumers can also permit the lender to withdraw money from their checking account for a short span of time.
It is true that these kinds of short-term loans offer instant relief to the consumers enduring financial traumas. However, there are several facts about these loans that are quite shocking and dreadful. Have a look at the following sections to know about them.
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1. The interest rates on the loans are very high
The interest rates on the loans don't accrue everyday. Interest rates are fixed in advance. Usually, the rate percentage depends upon the amount borrowed by the consumer. Most states specify the maximum interest rate that a lender can ask a borrower to pay. Believe it or not, the annual percentage rate can be very high. It can be as high as 400 percent. It can be 700 percent also. If the consumers take time to pay off the debt, then the lender will charge even more. The lender can impose additional interest rate and fees. In such a situation, the debt amount will only escalate.
2. The repayment terms are very short
The loan repayment term is very short. As it has already been said, the interest rate is very high. In case of legal lenders, consumers have to pay both the principal amount and the interest rates. They have to make the full payment within 14-15 days. The lenders may also debit the checking account of the consumers on a specified date. The lender won't consider the fact that there are not enough funds in the checking account. The lender will debit the account even if it becomes negative. The consumer will face problem due to the NSF fees charged by the bank.
3. These loans can be obtained very easily
A consumer can borrow money if he has the following things:
(a) checking account
(b) pay stubs
(c) identification documents
The fact that consumers can borrow money easily is considered as a benefit. However, on the hindsight, if the consumers think carefully, then it'll be found that the easy availability of a loan is a drawback.
The easy availability of money makes consumers borrow loans, which have very high interest rates. If the lending standards were little bit strict, then consumers could have easily avoided incurring such high interest debts. They would not have to get payday loan help later on.
Last but not the least, there is yet another shocking fact about short-term loans. The illegal lenders often use fraudulent tactics to collect money from consumers. Apart from that, they also use scare tactics to frighten consumers. They threaten consumers by saying that they would be arrested in the event of non-payment. Moreover, the illegal lenders also threaten to confiscate the properties of consumers if they don't pay the exceedingly high interest rates and fees.
Unfortunately, the consumers are not well versed with the state and federal laws. They are not aware of the fact that debts are civil. No one can be sent to jail for the debts. Only the legal lenders have the power to file a lawsuit against the consumers. In case, the legal lenders are able to defeat the consumers, then there can be a big problem. Consumers may face wage garnishment and lose a good amount of money every month.
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