Short-term payday loans have disadvantages
Often there is not enough money left at the end of the month to cover everyday life. This can especially occur with unexpected purchases such as a new washing machine or a new dryer, but also with unforeseeable investments such as the repair of the car. Likewise, high additional payment of additional costs can lead to a financial bottleneck at the end of the month. deliverjournal.com fleshes this out
The income is therefore not sufficient to cover the running costs by the end of the month. So that bills can still be paid, many consumers use their overdraft facility. If this is at the limit, a new loan is often taken out. Any loans are usually so-called short-term payday loans.
What are short-term payday loans?
As the name suggests, short-term payday loans are loans with a short term. As a rule, the maximum is 60 days. These are structured like installment loans and are characterized by a low loan amount. Any loans from 50 to a maximum of 3000 USD can be financed. However, due to the short term, the loan amount can pose a significant problem for the consumer. The promising financing solution can lead to over-indebtedness when the loan is due.
Conditions of short-term payday loans
In principle, short-term payday loans are granted from 50 USD. The maximum loan amount, depending on the loan provider, is a maximum of 3000 USD. With some providers, new customers receive a maximum sum of 500 USD. If the sum is repaid on time, the amounts can be increased. However, the mostly expensive interest rates should be noted. An annual interest rate of over 12% may apply to short-term payday loans. Any loans are therefore characterized by extremely high costs.
Additional costs in the form of fees
In addition to the high interest costs, short-term payday loans often hide additional fees. Due to the lack of transparency, these costs can cause a nasty surprise to the borrower. Especially because of the already lacking financial resources, the additional costs often travel an enormous hole in the debtor’s budget. It is not uncommon for providers of short-term payday loans to request a credit rating. The cost of this can make up around 10% of the loan amount.
With a loan amount of 500 USD, there are additional costs of 50 USD for such a certificate. Many creditors also offer additional services. However, these are usually characterized by their obligation to pay. For example, an installment payment option may involve additional costs.
This often results in costs of up to 100 USD for a loan amount of 500 USD. Any loans are therefore usually characterized by a disproportionate amount of costs.