Payday lenders have been under fire for as long as payday loans have been around. Lenders were investigated for their questionable lending practices. The high cost of the loan itself has always been debated with more people questioning the unreasonable interest rate attached to a short term unsecured loan.
After a 20-month long investigation, it seems like there’s going to be a shakeup in the lending industry with payday loans at the center of it all. In an attempt to help borrowers get a better deal, lenders may now be required to disclose product details on comparison sites online. This is so borrowers will have more information to compare objectively essentially helping them to find better and fairer deals.
Another regulation that hopefully will push through is the requirement for lenders to disclose details about late fees. If you’ve ever taken out a payday loan and you were late with payment, you should know how late fees can wreak havoc on your budget. By disclosing details on late fees, shopping around for better deals should be easier than usual.
Another improvement that may raise the competition and therefore lower the cost of the financial product is the requirement for lenders to communicate with customers in a more transparent manner. This improvement measure will require lenders to provide customers with summaries, outlines and details about their borrowing costs. An explanation about late repayment fees and how it affects their loan’s cost may be required as well.
While all these measures sound feasibly promising, I still have my reservations. In fact, I still wouldn’t recommend payday loans as a personal loan option no matter the emergency or circumstance for one reason. Payday loans only lead to a vicious kind of debt trap.
Unlike other types of loans, payday loans offer short term financing at incredibly high interest rate. You borrow money today that you need to repay with your next paycheck leaving you with money that, again, won’t be enough to cover the next month’s expenses. You will be forced to borrow money yet again incurring high interest rate leaving you with little to no choice but get trap in the cycle of debt.
While easy to avail, payday loans in my opinion are not the answer to short term financial problems. Even as a last resort, it’s not altogether wise. I say steer clear from payday loans and look elsewhere for quick cash.