So How Exactly Does Online Payday Loans Operate
Payday loans are cash advances that individuals are often given between pay checks. These are short-term loans that borrowers are expected to repay them in one instalment and within two to four weeks from the time they are approved. Usually, loans are applied online. To access the application form, the borrower is expected to visit the lender’s website.
Payday loans have become very popular in Singapore. These loans are meant to help individuals in times of emergencies. The application process takes just a few minutes. Ideally, licensed money lenders deposit funds by the next business day or a few days after the application are approved.
Nevertheless, competition has forced many lenders to improvise, and today, some deposit funds even just two hours after the application approved. This exactly makes them ideal for emergencies. In this blog, we are going to discuss how exactly online payday loans operate. So, lets us begin.
How Online Payday Loans Work
As we mentioned at the outset, these are short term loans that are expected to be repaid within two to four weeks. The loan amount usually ranges from $100 to $1000. To get the loan, you are only supposed to write a cheque indicating the amount that you need. A fee will be charged on any amount borrowed. The check might remain in the hands of the lender who will then cash it at the time you are ready to repay.
The loan is supposed to be paid back just in one instalment. In case you are not capable of repaying by the time it falls due, you may be allowed to roll it over, and the loan will be extended. This means you will not pay it then. However, the fees will keep accumulating. Rollovers are quite expensive, and in many cases, borrowers who take this option end up in a vicious cycle of payday loans.
To qualify for a payday loan in Singapore, you are required to be of legal age, have an active bank account, and have proof of income. Before applying for a payday loan, it would help to ensure you have a solid plan of repaying in time to avoid additional charges.
The following points summarize how a payday loan works.
- The applicant fills the registration form. As we stated earlier, this is done online. The structure is usually available on the websites of lenders.
- The loan amount often ranges between $100 and $1000, though some lenders offer as low as $50. In case the application is approved, the funds can be accessed by the next business day. But as we said earlier, some lenders deposit funds in borrowers’ accounts even 2 hours after the application is approved.
- The loan is supposed to be repaid in one instalment by the next payday, which is usually between 2 and 4 weeks.
- There are two payment options. The borrower may opt to postdate the check to the next pay check. Alternatively, the lender may be allowed to withdraw the funds from the account of the borrower electronically.
- The fee usually charged range between $15 and $20 in every $100 loan amount. This translates to an APR of at least 391%. The APR can even be 1000% in case it is not paid, and the fees keep accumulating.
The Benefits of Payday Loans
Payday loans continue to gain more popularity. While they are supposed to serve as emergency loans, statistics show that most Singaporeans use them to cover ordinary costs such as rent and grocery. What are the dangers of doing that? Well, we will come back to that shortly. Here are some of the benefits of payday loans.
- No credit checks. These loans are often given without credit checks. This means for one to be approved, good credit is not a requirement.
- Easy access. Since there is no credit check, access to a payday loan is easy compared to traditional loans.
- The application process is easy. Nearly everything is done online. It only takes a maximum of 15 minutes to fill the application form.
- There is a provision to rollover the loan in case the borrower cannot afford to repay the loan as expected.
The Dangers of Payday Loans
Before applying for payday loans, try to consider other possible options that you may have. Payday loans are costly, and rather than helping, they may end up worsening your financial condition. With the high interest charged, the loan is expected to be paid in one instalment and within 2-4 weeks. You may manage to pay back, but the challenge is, you may not have enough funds that can sustain you through to your next paycheck. When this happens, many individuals often take the option of rolling over the loan. This a temporary solution but can turn out to be even more disastrous.
A rollover of a $100 loan often attracts a fee of $30. This means by the next pay check, the burden will be even more. Can you choose to roll over again? Rolling over is actually not an excellent idea. You may never get out of payday loans if you keep using this option.
Consider Other Alternatives
In light of the above, payday loans can help you when faced with emergencies since access to funds is prompt. However, use a payday loan as the last option. Instead of helping, payday loans can worsen your financial situation. Here are some of the alternatives for you.
- Save for emergencies. At one point, everyone will be plagued with an emergency. With this in mind, start saving today.
- Consider borrowing from family members and friends. This one of the best sources in times of emergency.
- Sell the stuff you currently do not use if the situation allows.
- Build your credit. With excellent credit, you can get emergency loans from traditional lenders such as banks and credit lenders.
- Work overtime to increase your earnings.
The Bottom Line
Payday loans can help only on a short-term basis. Using them as long-term solutions to financial difficulties can be disastrous. In this blog, we have discussed how payday loan online loans operate as well as their benefits and dangers of using them.