In the recent years, there have been many financial reforms to make sure everyone including the lender and the borrower gets a fair go at acquiring and providing finance. One important market where the abuse on interest rate has been rife is the payday lending; interest rates can easily range from 50% to upwards of 1000%.
These so called high interest traps are well executed for a common citizen to understand. The details of the loan are not properly explained and the emphasis is almost always on the repayments.
These high interest loans do nothing but put the consumer in a worse position then it already is in. A typical consumer for these high interest products is someone with a low or moderate but regular income, someone who is struggling to keep up with day to day expenses like rent, grocery or utility bills and living on pay to pay day. This however, only leads to making these consumers who are already facing financial distress to the brink of a more severe financial hardship or even bankruptcies at worst cases.
There are varieties of ways to apply for a payday loan, popular amongst those are, visiting the offices or shops personally set up by the lenders in different jurisdictions, applying it online or even getting one through the phone. These loans are often quick, easy and a fast way to get holds of cash and also requires minimal paperwork.
The lenders typically use some sort of direct debit arrangement to make sure the repayments are automatically deducted from your salary account on its due date. This due date is usually the pay date. So, for the consumers who are already on a minimal income faces even further reductions on their earnings, leaving them with no options but to refinance the loan. So, the loan that once started only for a month or so, as in most cases end up being a long term debt.