finance industry has witnessed a wide spectrum of changes in the
last few decades. The emergence of new forms of credit like credit
cards, home equity loans, payday loans has raised the use of debt
by consumers and they remain indebted lifelong. Payday
are just like adding another feather to financial credit market.
When you hold a bank account, a credit/debit card, remember another
part of planet remains unbanked. They may be below poverty line,
they miss out the convenience, security opportunities of wealth
payday loan means a short term loan secured by post dated cheque.
It is also known as deferred deposit advances. For example, a person
borrows for Rs 1000 and gives the lender a post dated cheque for
Rs 1015. The cheque amount includes the principal amount and interest
accrued. On the maturity of due date, the lender can submit the
cheque to the bank and get it discounted. In case if the borrower
has no sufficient balance, he can refinance the loan by paying additional
fee to the lender. The borrowers can rollover for three times. Payday
loans are legal only in some countries.
loans has always been a topic for discussion. Social workers argue
that payday lending is a profit making business to lenders. The
users of payday loans are always in debt,as each loan is taken to
repay the previous one. The costs of payday loans are interest rate
and transaction cost. The Center for Responsible Lending has advocated
that pay loan lenders are not supposed to lead more than four times
to consumers and the term should be 90 days. Sometimes the lenders
associate third parties to collect cash.
bad credit history and low credit limit is a threat to lenders.
funds in borrower's account leads bouncing of cheques.
or consumers may misrepresent information
interest rate and transaction cost
value of money is not understood
to pay loan lenders:
Information: Banks are advocated to furnish accurate information
charges levies on payday loans.
Banks which lend both payday and other short term loans are requested
to discriminate potential consumers on fair basis.
The bank which is engaged directly or indirectly in pay loan lending
is required to furnish details why a certain application for credit
If a bank engages a third party to collect the debts, the bank should
ensure that collecting agents ensures fair practices in case of
default of debt payment by customers.
The privacy of consumers should not be disturbed at any cost.
The customer information should be safeguarded and should not be
used for any other matter that is not stipulated.
to pay loan borrowers:
payday loan lending schemes need to carefully analysed
credit ruins the business,so keep an eye on consumers' credit worthiness.
third parties are engaged for credit collection, their trust worthiness
need to be analyzed
check on bad credits
an eye on information provided by customers because misrepresentation
is a major fraud played in Payday
sure a written contract is duly signed by both parties
can borrow from your family or friends.
finance charges on other forms of credit should be studied
for more time to pay bills. Find out the charges on late pay.
sure you will have enough funds in your account when you give postdated
the amount considering your future income
can conclude saying payday loans=costly case
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