A lot has been said about payday loans and the payday lenders themselves most of which, might not be entirely true. Some people even fear the lenders because they have the idea they are only interested in making as much money as possible from the borrowers. Is it really the truth? Is this business legal? Can you be taken advantage of as a borrower? Are there measures the government has put in place to protect people applying for a loan? Here, you will learn some truths about payday lenders.
Who are Payday Lenders?
These are short-term loan providers who work as institutions but are not registered as banks. The loans they provide range between $200 and $2000 and the payment duration is supposed to be between 15 and 30 days. Payday lenders in most cases approve loans and make the funds available the same day. This means when you have an emergency, you can seek their services and expect to have the desired amount of money on the same day. Payday lenders are institutions that should be registered and regulated by the Australian Securities and Investments Commission (ASIC).
How do You Find Lenders?
In Australia, you can find online payday loan providers and ask around for referrals. Once you have an idea of who you want to work with, the next important thing to check out is whether they are properly registered.
How do you do this?
- Check for reviews. What do other people who know them or have used their services have to say? Were they satisfied or if not, why?
- Every lender should display the Credit Registration Number for Australian Credit License Number at the bottom of their website.
Are You Protected as a Borrower?
Most people prefer dealing with banks because they think they will be more protected. Also, the notion that banks are legal entities gives them more confidence.
Payday lenders also have regulations and rules they have to conform to. As a lender, the government and governing bodies recognize the payday loan as a personal loan. The Australian Securities and Investments Commission ensures that all payday lenders conform to the set standards. For instance, there is a maximum amount of interest they can charge in addition to the fact that the payment duration should not be less than 15 days.
Lenders are also not permitted to keep on communicating with the clients when there is a dispute concerning the loan repayment. If there is a delay in payment and the borrower communicates this to them, they should come up with a new arrangement comfortable for the borrower. Most lenders have flexible loan repayment terms. When they fail to come into an agreement or the lender is forced to use other means to recover the money loaned, a court of law should be the mediator. The lender is not permitted to use forceful means to recover the money. This means that payday lenders are legal entities and you should feel safe when accessing their services.
Who Do Payday Lenders Serve?
Payday loans are easy to access, unlike bank loans. The fact that they are fast and have fewer requirements make them quite popular in Australia. Almost everyone in the country can qualify for the loans.
Here are the requirements:
- Be over 18 years old.
- Have a reliable source of income. This can be a job or benefits as long as they are on a regular basis.
- Have a bank account.
- Have identification documents.
Those with bad credit can also qualify for the loans. This is because most lenders are interested in your current ability to pay any amount granted and the interest rate charged.
How do Payday Lenders Operate?
The most important thing that will actually keep a payday lender in the market is the ability to offer ready cash loans whenever the need arises. It is also important that they meet all the set regulations in the country. Payday lenders’ business operations are quite risky.
Why are the Payday Lenders Operations Different From those of Banks and Other Financial Institutions?
The cutting edge for payday lenders is the fast and convenient services. They are able to beat the banks because when customers want cash, they can provide this with minimal procedures and requirements. To get a loan from a bank, you are required a collateral and, go through a process that may take a few days or weeks.
How are the Australian Securities and Investments Commission involved?
The Australian Securities and Investments Commission ensures that:
- All payday lenders grant amounts up to $2000.
- They also handle disputes arising between the borrower and the lender.
- Ensure that all lending institutions are fully registered and licensed.
- Ensure that payday loan lenders do not charge more than the stipulated interest rate on the loans. This amount is reversed from time to time.
- Payday lenders should ensure that they communicate fully to their clients about the downsides of payday loans. They should also advise their clients on other loan options and even direct them to any other better option that they may have.
- Payday lenders should also communicate fully the amount the borrower is expected to pay even before approving the loan. This should include the principal sum and the interest charged. This gives the borrower time to figure out whether the deal will be favorable for him. When borrowers do not understand what they are meant to be paying back, they might end up straining or acquiring other loans to cover the payday loan which can lead to a cycle of borrowing.
Conclusion on Payday Lenders
In conclusion, payday lenders can be the answer when you are cash strapped or have an emergency but no cash at hand to sort it out.
Caution should be exercised when applying for payday loans because of their high interest rate charged and short payment duration that can be strenuous or lead to other financial burdens. Before going for payday loans, check whether there are other available options.