One ruined their lives, but they also helped many people to patch their household budget. Experts estimate that about 250,000 Poles have had contact with them, and the amount of loans of this type paid is around USD 4-5 billion. It proves that Online Payday loan have made a brilliant career on the Good Finance.
As the name suggests, this is a quick loan for a short period of time. Usually they are from 1000 USD to 3000 USD for one month. In addition, regular customers can apply for higher amounts and repayment in installments.
Why are they so popular?
First, a huge advertising campaign, and secondly, a great demand for this type of loan.
It is said that Online Payday loan are for people excluded by the banking system. This is partly true, because in our society junk contracts, fixed-term contracts, various types of benefits and black income are very popular. In this case, financial institutions will be reluctant to help us, and “payday companies” will welcome us with open arms.
However, it turns out that also people employed on normal contracts, from time to time use non-bank loans, borrowing small amounts. It is mainly about convenience and time to get money.
Imagine this situation.
We break the car, washing machine or central heating stove and we need money for ALREADY.
Now we have a choice.
Ask the employer for a certificate confirming employment, take a day off to go to the bank and then wait about 2 days for the loan application to be considered. We can also sit at the computer, fill out and send the request for Online Payday loan online, get a decision within a few minutes, and then the funds to the account.
Of course, the second option will be much more expensive, but I think there will be people who will use it, despite the much higher costs.
The good part
- quick decision – up to several minutes
- convenience – you do everything online, without leaving your home
- without checking the BIK database
- minimum formalities – without presenting income documents
The first free loan
Whoever invented it should get a Nobel Prize in Economics 🙂 Marketing ploy, … which worked.
The fact is that some companies offer a free first loan and if someone is smart, they can use this fact by taking a loan and paying it back after a month. In most cases, however, everything starts with the first loan and ends with a debt loop.
Let’s imagine that we earn USD 2,000 a month and decided to take a free payday loan in the same amount, i.e. USD 2,000 for one month.
A month passes, the money borrowed must be returned and we have a dilemma. We earned USD 2,000 and we have to pay the same amount, only the question – what will we live for next month? We must pay rent, bills, buy food and have to commute.
However, the “short-term company” is generous and will extend the repayment period by another month, but not for free, but for a solid commission, plus additional fees for late repayment of the first loan.
Making such extensions for several months, we will give back several times more than we borrowed.
Real interest rate almost 2000%
It is not cheap, it is certain. Looking through the offers of non-bank loans, I found one where the real interest rate is almost 2000%. Comparing costs with bank loans, we have a gap.
However, something for something. A quick loan without unnecessary questions must cost, but is that all it takes? I think it’s too much, after all.
Summary (each nightmare finds its amateur)
In my opinion, everything is for people, if there is a demand for it. Online Payday loan are needed, however, too much freedom in the functioning of companies providing quick loans, the lack of clearly defined rules and the upper limit of imposed costs lead to a “free American”. Customers lose it, unaware that Online Payday loan are a borrowing trap from which it is not easy to break free