Crediting is a worldwide civilized practice with a centuries-old history. Many people resort to this financial instrument, from super-profitable multinational corporations whose quarterly income far exceeds the annual budget of the middle country, to the most ordinary citizens in everyday life. The forms and methods of lending can be different: you can go to the bank, and you can ask for money from a relative or friend. Many people are afraid of lending and take credit only in a very desperate situation. There are several objective reasons for this, the main one is having the negative previous experience of lending, which arose due to a lack of understanding of the essence of this service. As with any instrument, you should know how to use a loan so that it brings you real benefits.
In fact, any loan is commodity-money interaction, in which the role of the goods is played by money. You take someone’s money for temporary use just as you would, say, rent a car or an apartment. Just like in the case of renting any other thing, you have to pay for renting money. The only way to make lending effective is to take out a loan in such a way that the value of money is commensurate with the benefits that it will bring to you. Therefore, the type of lending should be selected depending on how much money you need and when you are going to return them.
Is It Worth Borrowing Money via Short-Term Lenders?
Very often you can meet people who are fiercely adherents of not using the services of banks and other financial structures to apply for a loan. However, over 75% of people have credit cards or apply for small-dollar loans. Sometimes, circumstances develop in such a way that there is a need for fast money or the missing amount that is needed immediately. If you take small loans that rank first in terms of speed and availability, they are convenient because in this situation, money on the bank card will appear within several minutes and it will be possible to implement the planned actions. For example, getting goods and things you need within one working day, which obliges the buyer to immediately use this offer. The limited time, when there is still a couple of weeks till the payday, stimulates to apply for a loan. At the same time, the borrower should take into account his or her income being able to calculate the maturity of the loan by the date specified in the loan application. Only using the short-term loan during the intended period of time, you will enjoy benefits of borrowing online loans.
Payday Loan is the Leader Among Credits
In recent years, the sector of non-bank lending is booming around the world. Micro-finance organizations give loans for a shorter period than banks (it’s about days, not months or years), operate with much smaller amounts and make much more loyal demands on borrowers themselves. Among such institutions, those who issue loans online are the most interesting. That is, the registration of an application, decision-making and the issuance of money occur exclusively through the Internet.
The borrower does not need to spend time and money on transportation, carry important documents or large amounts of cash. The time taken to receive money does not exceed 20 minutes. This is an invaluable advantage when it comes to situations where money is urgently needed, and, perhaps, the only legitimate way to get money quickly. A common feature of all lending companies is that they work even with those groups of people who are denied by banks. Getting an online loan is much easier than a bank credit.
Using a short-term loan, it is important to remember that this type of loan is not designed for a long term and is not designed to borrow large amounts. For long periods, initially a small daily interest rate, equivalent in most cases to the cost of a cup of coffee, turns into too high amounts of payments. Online loans to a card are worth taking in situations where there were unforeseen, urgent expenses not provided in your budget. It is important to remember that, unlike a loan in a bank, a daily interest rate applies to small-dollar loans. It’s like renting an apartment or a hotel room – different goals and different costs.
Payday loans are the most common category among all types of loans chosen by those who can’t deal with urgent financial problems. Applying for online loans becomes a habit for most people. This is a really great opportunity to get the necessary amount of money to solve temporary financial difficulties quickly, without unnecessary documents, without leaving home and enjoying other advantages using payday loans.
At the same time very often applying for an online loan, borrowers make a series of mistakes, which in the future can cause serious financial problems. That’s why it will be wise to consider the typical mistakes of borrowers when using online loans in order you can avoid the same errors in the future. There are certain things you should be aware of if you are going to deal with payday lenders.
Typical Mistakes Most Borrowers Do Applying for an Instant Loan Online
- Fill in the application for online credit yourself: Do not transfer your data to apply for an online loan to other people, always fill out an application on your own. Be careful when entering all the required data. Since the online loan lender doesn’t often require providing information on employment, borrowers often seriously overstate the amount of wage in the hope of obtaining a large loan amount. This should not be done, since for the creditor, firstly the honesty of the borrower is always important, and secondly, many micro-financial organizations have information on the average salary in the context of specialties. It is also important to accurately indicate the existence of credit obligations to other creditors at the time of online credit. This information is also checked through the credit bureau.
- Negligent attitude to the study of the loan agreement: The loan agreement is the basis of the borrower’s relationship with the microfinance company. The contract prescribes all the essential conditions for issuing an online loan, such as: the loan term, the loan interest rate, the early repayment of the loan, the possibility of prolongation, the penalties for late repayment of the loan, the responsibility of the parties, the creditor’s actions in the event of a loan default. The time spent by the client on the site shows (when applying for online loan, it is possible to check how long the client was on the “Loan Agreement” page) that many customers do not bother to pay attentive reading of the contract and to study all the important conditions for obtaining an online loan. On the “Loan Agreement” page, on average, clients spend not more than 5 seconds. This error can be called the most common among customers. As a result, such negligence can significantly increase the client’s financial expenses for servicing his or her debt.
- The lack of a loan repayment plan: Many customers when placing an online loan postpone for later the decision about what will be a source of the loan repayment – wages, sales of unnecessary assets or the receipt of additional sources of income. Often, the main problem in this matter is the lack of skills of the borrower in the proper planning of his or her own budget. As a result, on the day of loan repayment, such borrowers are not in a position to make payment on the loan, which leads to the accrual of penalty interest on the loan and, as a consequence, an increase in the amount of debt. You are always recommeded to pay attention to the amount that you need to return (usually indicated on the calculator when you enter the amount and term of the loan), the planned payment should not exceed 30-35% of your monthly budget.
- Invalid actions when there is a problem with the debt repayment: If there is a problem with repayment of the loan, customers do not contact the lending company in which the loan was issued and do not formalize the loan restructuring. For example, in some companies, it is possible to extend the loan from 15 to 30 days, which can be issued independently in your personal account. The prolongation of the loan avoids an increase in the interest rate for the loan. You should always use this tool to manage your debt in the absence of money to pay off all the credit on time.
- Refusal to pay a loan: Being in a difficult situation, the client may decide not to repay the loan. Perhaps, the borrower has doubts concerning the legal force of the agreements on the Internet. When applying for an online loan, all mutual obligations are fixed in an electronic document and this agreement has legal force in accordance with the Law “On Electronic Documents and Electronic Document Management”. Therefore, agreement has the legal force. The actions of the client in such cases are very predictable – to change or disable the phone number, expecting that the payday lender will not make much effort to find it and the situation will be resolved by itself.This decision only leads to a complication of the relationship between the creditor and the borrower. In such cases, the lender may transfer the loan to the collection company, and also enter the client’s data into the so-called “black list” of debtors in the credit bureau. Information on the black list of debtors is available to all banks and micro-finance companies and you will have to forget about new loans till you pay back the current debt.
- Check your account after the loan is closed: When repaying a loan, it is possible that the client has paid the full amount in accordance with the contract, and after a while finds out that there is outstanding debt, which is growing rapidly due to penalties. The client was making a repayment not through a personal cabinet, but through third-party services. With such payments, the company carrying out the transfer, can send to the creditor, a smaller amount, retaining its commission for the transfer. Payment through the bank takes up to 3 days, so the creditor will receive the amount to repay the loan with a three-day delay, and during this time the client will be charged interest.
Thus, the amount sent is not enough to fully repay the loan. Therefore, you are recommended first of all implement credit repayment in the personal account from your account. For the comfort of customers, most direct payday lenders notify their customers about the closure of the credit via a message and duplicates the message to the email. You, in turn, be sure to check the information on the status of your loan in your account. If you have transferred the money for repayment in full, and the loan is not closed, call back the support service and ask to sort everything out.
What Do You Need to Know about the Delay and Prolongation of the Loan Payment?
Before applying for a loan, the client should familiarize himself or herself with all the details that accompany the loan. This is the term of the loan, the amount and interest, the possibility of prolongation, delay, pledges, sureties and much more. There are situations when the borrower does not provide all the risks and does not manage to repay the loan on time because of the lack of the required amount.
In such cases, two important points, like rollover and delay, should be taken into account. The delay in payment is a violation of the deadlines for the fulfillment of obligations that are prescribed in the contract or are provided for by law. Prolongation is a deferred payment for a loan for a certain period, agreed between the parties that have concluded the contract. Therefore, if there is a situation of untimely repayment, it is necessary to use the prolongation or an extension, which is commonly used for this option, paying only interest on the debt without a loan body, that will solve the situation with the debt without spoiling the credit history and will allow to delay the time until the desired date.
In case of untimely payment or prolongation, the delay arises. Then the picture on the loan will change dramatically and the borrower will have to overpay several times more, in addition, he or she will be constantly called and reminded. The lender may sell the debt to collectors who will start disturbing your relatives and colleagues at work.
You are recommended to initially fix the amount that can be taken and actually repaid within the specified period, as well as to determine the time period during which the debt will be paid back. It is always possible to prolong the loan, most importantly, do not forget to do it at once, without creating additional problems. It is possible to benefit from such an effective financial tool as a payday loan if you follow the above-mentioned recommendations and have a responsible attitude towards this type of borrowing.