Why You Should Avoid Payday Loans, Cash Advances and Same Day Loans

Looking to get a payday loan or similar? Please be very careful! The costs of repayment are high and often create a lot of stress.

Hi there this is chris from money hub and this video looks at payday loans so just as a preamble before i get into it we’re very very negative on payday loans we find them completely overpriced we find them a very aggressive with their fees with their follow-up with the ability to kind of roll them over or redraw on them we think they’re just a bad news but obviously

You’re watching this video because you’re considering getting one what our viewers here is please please take your time to consider it and look at all the options which i’m about to just go through and explain we don’t want you rushing in to get one we find them just really bad news we know people get trapped in these payday loan cycles so without further ado i

Will explain more but please don’t rush into it we’re very very clear in the guide that we’ve written here not to uh you know not to make a quick decision because that can have a long-term consequence you can see from a warning here that we really see payday loans as a last resort and if you are looking for a payday loan please make sure that you can repay it

Because it’s very easy to take the money but then trying to manage the repayments is not often that easy and if you are uncertain about whether or not you can pay it then you’re going to face a whole bunch of penalties and a whole bunch of penalty interest rates if you can’t that’s just a fact we know that a 300 loan a 500 loan can turn into a thousand dollars of

Debt very very quickly and so for this reason we just say you know first and foremost please only borrow if you can repay but before you do make the decision look at all the options uh while the government’s been very helpful to bring down the cost of payday loans it’s still quite expensive interest rates so we’ve seen everything from around 50 per year to about

292 percent per year of course the borrowing is kept at a hundred percent uh you know rates so if you did borrow 300 the maximum you could repay is 600 but still it’s not that does not make it cheap so if you look at credit cards or personal loans they’re usually around 15 to 25 interest rates so here that you’re at least paying double plus all the fees on top

And so what our guide explains it just takes you through like what the options are with so we haven’t linked to anybody uh what we’ve done is just to make it clear is that we’ve presented the what we call the least worst options but but of course they are still very expensive uh you know ways to borrow money so one of them you know i’m not going to name them here

Because they because the guide always changes uh but you can have a thumb through under this uh top three least worse we always keep three on there just for your information and uh it shows you what the fees are and it kind of gives you a summary of what you can borrow and uh what you uh you know what you have to pay back so with that all being said uh what my view

See also  VA Home Loans Offer 100% Financing

Is is that there are alternatives um but before we get to that i just wanted to explain that for information about payday loans what you need to know really is what the fees and what the interest cost is those those two things i will drive how much you repay so you may have a low interest rate or a lower you know lower interest rate than another payday lender but

The fees may be higher so this is where you need to compare exactly the total cost of the borrowing uh from one a penny lender to another if you’re going to properly um you know make a comparison and uh you know the interest rates do vary and the more regular that you can repay the cheaper the overall payday loan will be this is because the money that’s uh you

Know being repaid is not being charged interest so do keep that in mind there’s many there’s many times that late fees will be charged the payday lenders are quick to charge them so that you know is that’s another cost which won’t be built into your uh total quote but certainly it’s it’s usually unsurprising if at least uh you know one lender doesn’t meet a late

Payment at some point depending on the uh you know the term of the loan how long you know you have to pay it back so really look at the interest rate the higher the interest rate the more expensive the loan and the total repayment is what you need to know about which is going to be the loan amount plus the interest cost plus the fees uh so see what that would be

The longer the loan term the more the more expensive the debt will be or the loan will be that’s because interest is charged at such a high rate that if you borrow for longer you’ll pay more back many of the payday lenders helpfully let you make early repayments without fees if that’s something that you want to do or you think you can do please ask or make sure

That the payday lender lets you do that because otherwise you may be you know having to pay an extra fee to be able to repay the money that you owe we have looked at everything we’re very conscious that there are some least worst ones which we’ve listed but but at the same time there’s also very high interest rate out on the market we’ve seen as i said 200 292 percent

And that just makes things incredibly incredibly expensive it’s not it’s not too difficult to borrow five hundred dollars and then have to pay back a thousand dollars in total within a few months so please uh please be very very careful before proceeding what uh people ask uh you know it’s quite common is what happens if they can’t repay the answer is you’ll be hit

With fees that’s that’s pretty much what’s going to happen straight away the fees come first then you know you can if you have had a change in personal circumstances or a financial difficulty then you can look for it to be assessed under hardship but that’s a whole different process and of course the lender the payday lender has to do the right thing there and see

If you can repay it and you know what your situation is um but if you haven’t you know but if you’re not approved for that then you’ll just like you will be chased for the debt and uh things can get nasty quite quickly because a lot of people on payday loans you know they have they have trouble repaying them and the payday lender would go out of business if it

See also  TI-84 Calculator - 36 - Calculating Mortgages and Loans

Let everybody who can’t repay them you know not repay them because it needs to get the money back so they are going to follow you that’s what they do that’s their business model that just means you need to be prepared to be able to have the money set aside or at least get it from somewhere to be able to pay it back every week or like whenever it’s due this is why

Payday loans are very stressful a very stressful debts and that’s where we always suggest there’s so many other options you can consider which i’m going to list down below so uh if you already have a payday loan or if it’s something that you’re uh looking to get um then what we always suggest is look at other sort of dead options so one of them would be look at

Your credit card like can you get extra to balance out from that the reason we say that is because the interest rate is going to like be maximum around 25 so that’s always going to be cheaper than a payday lender plus you don’t have the uh you know the after effects of the penalties if you don’t repay it like the payday loan as a you know that’s that’s the model

Where’s credit cards are less uh less aggressive debts but then also we’re looking at cash withdrawals on credit cards so if you can’t um you know if you need to have cash to actually pay someone or something then maybe it is an idea or so to look at uh you know considering making a cash withdrawal on a credit card once again you’ll be paying the 25 interest rate

And that’s that’s going to be a lot lower you’re not going to pay any upfront fees to do it so that’s something worth considering look at look at also increasing your credit card limit the problem with that is now with cc cfa the laws have changed so lenders have to be or credit card banks and stuff have to be very very careful about doing this but you know if there

Is a chance then it is worth certainly applying it does take some forms fourth look at a zero percent or a low balance transfer a credit card offer and the reason that is people max out on credit cards and then they’ve got you know they’re overdrawn on the bank and something’s due and they think i need a payday loan it’s not it’s not uncommon payday loans aren’t

Uh you know for a certain sort of wage earnings or level they they do apply across the board i know that uh from you know a whole bunch of personal experiences with people i know and uh and that’s why there’s no judgment in them it’s just sometimes people run out of money and they and they need money payday loans exactly is what they uh you know exactly designed

As their name assays but you know there’s a way to avoid them all together if you can just sit up or sort out your debts before it gets to the stage so zero percent balance transfer credit card so it like work really well uh when you transfer the debt onto a nice low interest offer or a zero interest offer you repay it you know progressively and then you cut up

See also  Options instead of Payday Loans

The existing card that you transferred it from so you don’t incur any more debt that’s how it works that’s the best way to do it uh you know successfully so you can be debt free that will help you save on the interest costs that which you’re paying and also it’ll give you uh free money because you’re not going to be you know like wasting money on those costs so

That is something to consider you know of course if you’re getting a payday loan overlooking right now then it’s not going to be something that you can quickly jump into with regard to the balance transfer but it is something you know you can put in place once lenders see or once back see that you have a payday loan that does also create some issues so it really

Is such a great idea just to kind of like avoid it from the start by you know managing your money a little bit more uh was sorry slightly differently to avoid these uh situations personal loans are another option they go for around you know 10 15 25 and that’s that of course is much lower than a payday loan so you may want to consider looking at those and uh you

Know getting one out possibly if you have a payday so if you have a payday loan already it could be an idea and normally we don’t say a solve debt by taking out more debt but if but if a personal loan can be taken out and like we pay you know one or two payday loans that you have floating around then likely to be a cheaper option in the end and uh you know like

Bring your debts under control we also suggest considering uh like all these icons these are all considerations borrowing from family not something that we have too much experience in uh in terms of writing guides about it but uh it may be just something that you want to consider and then at the same time increase your bank overdraft while we don’t love what banks

Charge in terms of the overdraft we find it quite high uh you know it is going to be a lot cheaper than that than a payday loan thanks very much for watching this review if you have any questions about payday loans please leave them in the section below we’ve got lots of links to payday loans guide from money hub and some related information and also please know

That you know payday loans they’re not the final option there are there are other options and we just uh we just ask you please to take it very very slowly before rushing in because once you have one it’s very hard sometimes to get rid of it we just don’t want you dragging around these debts uh month after month or week after week can get very stressful and then

You know you just it’s not something that you want to be doing so thanks very much and do let us know if you have any questions or need anything further explained thank you

Transcribed from video
Why You Should Avoid Payday Loans, Cash Advances and Same Day Loans By MoneyHub New Zealand