Jul 18, 2012

Pay day loans

If you are in a hurry for cash and need a quick loan on the same day for an emergency or any other reason you can apply for a Pay Day loan and have the money available to you on the same day. All that is required is your ID, three months’ bank statements, your address, and a voice confirmation by telephone. You need not even move from your desk as you can fax the documents and some companies provide free fax. These are for loans up to R2500.

How it works.

You apply for the loan and fill out the form which will list your details. They do a check at the bank based on the information you have supplied. All contracts are signed and voice recorded. If everything checks out you have the money by five in the afternoon in your account. Nothing can be simpler except for this last very important part. The loan must be repaid in full on your pay day by debit order. Once your loan has been repaid you automatically qualify for a new loan each month.

Fees and charges

Credit agreements are subject to an initiation fee of 15% of the full amount borrowed on the first R1000 and then 10% on each amount over R1000, up to R1000 plus Vat. The company bases its loan decisions on many factors, including your gross salary, net salary, length and types of employment as well as the outcome of a credit check by the Credit Bureau. If you miss a payment you will be subject to a R50 service fee as well as 5%. All fees are disclosed. The company claims that their rates are in step with the National Credit Act and among the lowest in the industry.

Late payment penalties for payday loans

If you fail to pay the amount they will contact you in order to make a new arrangement to settle the account. If you have not done so after thirty days and appear unwilling to pay, the matter will be handed to their legal representative to collect the amount; this will result in a negative impact on your credit score. Once judgment has been passed they will recover the amount from your employer. If you have repaid three successive loans in a row you will be able to reapply. They can be of assistance if you live anywhere within the Republic of South Africa’s borders.

On the flip side of this, payday loans pose a substantial risk to the borrower as it rely on the past history of the consumer having previous payroll and employment records - and has a default rate of 10% to 20%. According to Wikipedia a study done showed that defaults cost pay day lenders around a quarter of their annual revenue. A pay day loan becomes more expensive in the end for all the factors above, especially in view of the fact that pay day loans do not permit interest compounding and the principal amount stays where it is. Having said all of that, the borrower got the money which allowed him to get out of his situation.


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