Car Loans Online :: Articles

The Truth Behind Payday Loans

The Truth Behind Payday Loans

There’s a lot been said about payday loans.
Many claim that the interest rates charged are outrageous.
Others say that they are the only source of finance available for those with less than perfect credit score.
There is a bit of truth in both claims but there is much more to payday loans than meets the eyes.

A Simple Concept

When Pay Day Loans first appeared in the finance industry, they came to fill a gap not covered by any other financial product.

The original idea which remains in most of the loan products of this kind is to provide a small amount of money, usually up to half of the borrower’s wage for a short term (till pay day) at the end of which the money is reimbursed plus a fee or an amount of interests.

This was a simple and speedy way to solve a temporary lack of funds.

Traditional personal loans took too much time to be approved because there were too many credit examinations to be done.

The whole concept was extremely simple: A small amount, a short term, fast approval.

Debt Stressed?
If you're struggling to pay your debts as well as covering living expenses, we are here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

How do lenders get a return on such small amounts?

Even simpler, the interest rate charged is considerably higher. The high return in terms of percentages also came to justify the high risk involved in these transactions for the lender.

Since there are no credit checks whatsoever and the loan is unsecured, there is absolutely no guarantee that the borrower is going to return the money (other than his/her salary).

The Actual Situation

Problems began when the proliferation of this kind of loan drew so many unscrupulous lenders to this new market.

In order to attract new customers they began to offer longer repayment programs, loan renovations, interest reschedules, etc.

As with credit cards the flexibility offered by Pay Day Loan lenders began to create a vicious circle for many people that had no control over their finances.

Thus, they take a pay Pay Day Loan, fail to repay it on time and take another one in order to pay the previous one and so on.

Debt starts accumulating, interests increase and sooner or later a debt consolidation program is necessary or worst, they have to file for bankruptcy.

It’s as unfair to say that the whole responsibility belongs to the lenders as it is to say they have no responsibility at all.

The advertisements, the hidden loan terms concealed in the fine print of loan contracts too long for anyone in a desperate situation to read and the easiness with which some lenders extend loans for people they know can’t repay without making huge sacrifices has a lot to do with the bad reputation of Pay Day Loans.

Applying for a Pay Day Loan is not a sin

If an unexpected situation arises and you don’t have the money you need to solve it, nor you have the time to resort to other forms of finance and you know that you’ll be able to repay the loan without problems by next payday, it won’t kill you to request a Pay Day Loan.

What you need to understand is that they are meant for emergency situations and you must avoid taking it as a habit to request a Pay Day Loan every time you need extra cash for whatever reason.

Need Money for a Bike?
We offer fast, free, easy access to the best Bike Loan rates and options in the Australian market. Simply use our 3-minute Bike Loan enquiry form to see if you qualify … and you'll get instant access to our national Bike Loan broker network … for free advice and assistance through the approval process. No charge, no obligation!
Insuring your most valuable asset
While many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.


Finance Articles

Credit Cards: Identity Theft and Credit Protection Credit Cards: Identity Theft and Credit Protection
Credit card fraud and identity theft have become widespread not only on the Internet but offline as well. Learn how to avoid these risks and protect your identity as well as your finances or credit line. - read more
How to freeze the Plastic Debt Dragon in Your Wallet How to freeze the Plastic Debt Dragon in Your Wallet
Are you scared to open your wallet knowing there is a fire snorting dragon lurking in there? You don't need to be afraid of your credit card, you can make it your friend. Here is a plan to choke the dragon and replace it with a friendly furry critter so you can start creating wealth in your life. - read more
Personal Loans And The Consumer Credit Code Personal Loans And The Consumer Credit Code
Understanding your rights as a consumer is essential in dealing with complex issues like personal loans and other finance. Here we reveal, in simple terms, how the Credit Code works for you. - read more
Utilising A Chattel Mortgage for Business Finance Utilising A Chattel Mortgage for Business Finance
A Chattel Mortgage loan is a simple yet effective finance option designed for business plant and equipment purchases. Here are six rules to consider when arranging finance for your business that will ensure that you retain full control over the loan process and save money in the process. - read more
Knowing these loan finance options will make borrowing easier and save you money Knowing these loan finance options will make borrowing easier and save you money
Knowing these 6 types of loan finance options will make it easier for you do deal with brokers and lenders. Once you go from asking for a loan to asking for a "novated lease with a 45% balloon payment" you will be in a far better position to negotiate your loan with confidence. - read more
Simple Tips On Getting Your Loan Simple Tips On Getting Your Loan
So, you want to get a loan? Here are some simple tips that might help you make more informed decisions about the type of loan you buy, and from whom. - read more
18 Hot Tips For Intending Borrowers 18 Hot Tips For Intending Borrowers
If you're thinking of borrowing money to buy a car, boat, debt consolidation, home repairs, medical bills or anything else for that matter, here are some red hot tips to make the process much, much easier. - read more

Finance News


Need Help Finding a Loan?
Get a free car loan eligibility assessment and compare offers tailored specifically to your circumstances.
Loan Amount:
Postcode:
All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Debt Consolidation:
Taking advantage of lower interest rates that may be available by the grouping of multiple loans into one, lower interest rate loan.