Today microcredits are a widespread phenomenon in the present world and modern society. They are small loans called payday loans. Such loans are issued by financial companies. Like every product, the so-called online payday loans have their own characteristics. Payday loans are issued online much faster than bank loans since you do not need to fill out a lot of documents. However, their cost significantly exceeds a loan from a bank.
If you want to take out an online payday loan, then be sure to pay attention to:
– official registration of the institution (check the information of the company through the bank system. If you do not find information, do not use financial services from a dubious company);
– the offered interest rate (the cost per day of use without additional commissions and payments. See for yourself at MoneyZap Note that the annual rate can reach several hundred percent, especially if you intend to take an online payday loan);
– payday loan payment schedule online;
– fines in case of delay or refusal to pay on time (even a few days of delay can cost a significant amount from loan to paycheck);
– the terms of the agreement from the MFO (carefully read all the terms of the agreement and only then sign it with full confidence. It may indicate special conditions for calculating interest and additional services that you should pay attention to when applying for a payday loan).
Advice: Be attentive to the special conditions for calculating interest. We are talking about cases where the financial institution does not immediately agree on the entire debt amount of your online payday loan. For example, you asked for $ 10,000, and the institution agreed at first $ 5,000, and a few days later the rest – $ 5,000 loan. It may seem that this is just one loan although, in fact, these are two separate loans in which interest rates, maturity dates, and the number of fines may differ. Carefully read the terms of the agreement and pay both loans taken on time.
What are the Maximum Fines?
A payday loan is a loan of up to 1 minimum wage. Fine and penalty cannot exceed double the amount of the loan. However, unfortunately, this applies only to loans issued in accordance with the laws adopted by the Ministry of Finance. As a consequence, the maximum limit of fines and penalties is set. For online payday loans issued before the agreed date, the penalties and interest specified in the contract may apply.
Loans over 1 minimum wage have also a limit on fines and penalties. They cannot exceed half of the loan amount. But! These restrictions do not apply to other payments that are payable for breach of credit obligations.
Important to know: during the period of the quarantine restrictions, fines and penalties are not calculated. However, this does not apply to the accrual of interest and additional payments on the payday loan you have taken online.
Most Popular Myths About Online Payday Loans
Myth No. 1. MFOs are Semi-Legal Creditors and Scammers Who have no Government
In fact, all activities of MFIs are regulated by law. You can check the legality of the organization in the register on the website of the US Central Bank. If it is not there, then it is just scammers. Note also that in the search engine, legal MFIs are immediately marked with a blue checkmark.
Myth No. 2. MFIs Give Out Small Money at Huge Interest
This is also not true. Now the law obliges MFIs to convey to the client all information about the amount of an online payday loan as clearly and in detail as possible. So, the maximum possible interest for a consumer loan is 1% per day. But if you take a small amount for a short period, then this is not so much.
Myth No. 3. MFIs Take Away Apartments
It is strictly forbidden to issue payday loans to clients online secured by MFO housing. Such a law was introduced by the US authorities. If such conditions are still offered to you, then these are scammers. In this case, you need to contact the police and the Central Bank. Moreover, we note that thieves in most cases act according to the following scheme.
For example, you decide to take out a loan for $ 100,000. When issuing money, you are told that for reliability it is necessary to mortgage your apartment. Instead of a payday loan agreement, the borrower is offered to sign a gift or sale agreement. Claiming that these are just formalities, and as soon as you pay off the debt, the apartment will immediately return. But this is all not true.
Myth No 4. MFIs Cashing in on People Who Barely Make Ends Meet
MFIs are approached for various reasons. For example, up to 25% of all microcredits are online payday loans for small and medium-sized businesses including with state support at rates of 4% per annum. The share of loans before payday is only 22% but these are not always people with a difficult fate. However, payday loan rates can be more profitable with an MFI than with a bank.
Myth No. 5. Collectors Use Barbaric Methods to Collect Unpaid Debt
In fact, MFIs transfer to collectors only a small part of arrears in the worst cases. Nevertheless, their activities are also regulated by law. So, all threats of violence and the use of physical force will be punished.
Interaction with debtors must be civilized. For example, it is forbidden to call customers at night and threaten life and health. Also, the law came into force which states that in order to negotiate with relatives of debtors or their neighbors. Creditors or collectors will have to obtain the consent of the respondents. Previously, only the borrower could give it. All these measures are necessary for matters of late payments collection.
Before you take a payday loan from an MFI, you need to think about how you will repay the debt. It will not simply disappear. In any case, it will have to be repaid within the terms established by the contract. This important point will help you avoid debt overhang and maintain a good credit history.
Source: Plato Data Intelligence