Payday Loans in South Africa
The importance of payday loans is undisputed options. Whenever one considers the life of a permanently employed breadwinner, it is essential to have a constant supply of income as this will facilitate smooth working and further improve their performance at work.
A person who earns their sole income from employment, live a financially risky life. On every occasion that their salaries get delayed from becoming insufficient, it becomes a reason for concern, making the life of a worker uneasy about going without financial help.
This is negatively impacting the well being of a community and South Africa at large. Due to the developmental of payday loans by the micro-finance institutions, workers have been given a good reason to smile. That is, South African workers can now have a stress free month, being able to tackle financial grips within the month by the use of payday loans.
What are payday loans?
There is a class of personal loans that are small, fast to acquire, and these are loans with a design exception for employed citizens that have regular salaries.
Payday loans are short-term personal loans, that are issued over a short period — once-off repayment on payday or the day when the salaries of the employee reflect in their bank account. Payday loans are in the class of quick loans, short-term loans, and personal loans, with similar application requirements and a different repayment scheme. Payday loans are issued in amounts that are far below an individual’s salary. The loan will be repayable within the same month, with a one-time deduction from the client’s payroll.
Payday loans can also be branched into instant and shopping loans, and these are forms of payday loans that are issued for a specific purpose.
When payday loans are classified as shopping loans, they will be meant to facilitate the shortage that shoppers experience during their buying activities. Payday loans for shopping purposes are the smallest in amounts. In addition to that, payday loans can come as instant loans, and these are loans issued to existing clients of a financial institution or company that sells items on credit.
Payday loans in the form of instant and shopping loans use minimal external credit assessment procedures. They all are issued in line with the National Credit Regulators (NCR) directives on both interest rates and responsible lending procedures.
Why Payday Loans?
The importance of payday loans can be traced to the problems that workers face in their daily lives. Through the routine of going to work, one comes across ups and downs where financial strains come through.
The workers are good unless they come across accidents, shortage of fuel, food supplies, medication, and other related supplies. These generally disturb the free flow and the routine of going to work, but in the presence of payday loans, one will be assured of a quick, cheap, and reliable personal credit solution.
Furthermore, payday loans give loan applicants an advantage over other types of personal loans. Although these loans are highly valuable and useful, they are issued at incredibly low application requirements.
The significant advantage is when one decides to obtain a payday loan in the form of a shopping or instant loan. There the applicant will have absolutely no internal credit assessment, their past performance on other investments will determine the size of the loan to be obtained.
This shorter credit assessment procedure also goes the extra mile in reducing the time between application and disbursement of the loan and making sure that the applicant will obtain funds in time, allowing them to tackle the relevant financial hick-ups quickly.
Above all the advantages of payday loans, there is one primary reason why South African employees choose to finance their requests with payday loans. Payday loans are an easy, faster, and reliable personal finance option. The shorter credit assessment process makes them more comfortable and quicker.
The active element of payday loans comes when the applicants can cover their financial requests at the same time, improving their credit scores. The payday loans are issued in the right amounts that any applicant can repay. At the end of the repayment period, the applicant will be having better prospects of acquiring more extensive credit facilities. That is to say, and payday loans give you more.
Where to obtain Payday loans?
Similar to other types of personal loans, obtaining a payday loan is not an easy task to prospective applicants. The task is a bit harder for employees as these are the people who spend most of their days and nights working. If leaving them with little or no time for doing relevant searches.
These workers are found to be victims of scams, money laundering, and predatory financial activities which are undesirable to anyone who has worked so hard to earn their wealth.
Registered microcredit lenders issue payday loans.
These are sole traders, companies, banking corporations, and micro-finance institutions who are registered with the NCR, at the same time holding a valid lender license. These licenses are displayed at the company premises, where all the stakeholders can view and analyze them without any complication. These are the companies that are allowed by the South African regulations to operate issuing payday loans.
The major players in the field of payday loans include the Army Foundation, Boodle and Cube finance. These are the companies that have reliable financial services in addition to an excellent working history with the clients.
The more significant number of financial institutions that offer payday loans makes it uneasy for loan applicants. To curb this problem, loan applicants can employ the use of loan brokers to access loans. There are online companies that have made extensive researches on personal loans and related products.
Loan brokers bring faster access to payday loans, to the extent that loan applicants will not need to look for a loan service provider. The applicants will be facilitated to make applications through the brokers, who will auction the offer amongst a large number of payday loan providers. Amongst these providers, there is Loans Connector, Loans Hub, and Laonzie. These are well known for providing a free, faster, and reliable link to payday loans.
Furthermore, payday loans can also be accessed from banking institutions. Although banks do not specialize in these short and fast loans, applicants with good credit ratings are afforded the chance to finance their problems cheaply.
The best option when one wants to apply for a payday loan through a bank is to approach their bank. A bank that you have entrusted to receive your salary through, one which keeps your funds, will have a better understanding of your needs. People can also apply for payday loans through other banking institutions; the major players in the microfinance area are Wesbank, Old Mutual, and Nedbank.
What is the cost of having a payday loan?
Payday loans have similar costs to all other types of personal loans, and these are interest charges, initiation, and administration fees. Where the loan applicants fail to live by the loan covenants, they might expect to be charged with penalties. These are the charges that financial institutions use to recoup financial expenditures related to issuing, collecting payments, and the administration of the loans. The NCR, through the National Credit Act of 2005, has put interest rates regulations.
Payday loan applicants have the task of scrutinizing the loan covenants as some companies make use of hidden costs and additional fees. These fees can be a detriment to the value that an applicant will gain upon obtaining a loan. When it comes to interest rates, micro-credit providers should abide by the regulatory prices provided by the National Credit Regulator.
Interest rates are capped at a maximum of 5% per month or the effective rate on periods longer or shorter than a month. While making sure that applicants are not financially exploited through interest charges. Interest rates will also vary with the time which the client takes to repay the payday loan.
What amounts are avalable for payday laons?
Payday loans are a form of short-term personal loans which are issued with the need of curbing short-term financial problems. This means that short-term loans come in small amounts which are repayable in a short period, a period lower than a month.
On all applicants, payday loans are issued on amounts that are significantly lower than the salary of the applicant. The size of the payment further enforces this. The rule of thumb on payday loans is that the total loan amount, interest rates, and other charges should be significantly lower than the net salary of the applicant. This will enable the applicant to repay the payday loan, without financially straining their monthly budget. Payday loans come in sizes that range from R300 to R8 000.
Obtaining these amounts will be determined by your credit score, willingness, and ability gained from the credit assessment conducted by the company staff.
What is needed to obtain a payday loan?
Payday loans issued by registered micro-credit providers in South Africa fully comply with the principles of responsible lending. This making sure that all the applicants are served with right payday loan amounts.
Payday loan providers are obliged to collect relevant and sufficient information to allow them to perform internal and external credit evaluation. This has led to an essential and minimum regulatory requirement, which all payday loan applicants should meet before lodging an application. The applicants should be South African citizens who fall in the age group of 18 to 65 years.
These would be permanently employed citizens who receive their salaries through a South African bank. In addition to that, applicants should apply for payday loans that are below the halfway mark of their net pay. That is if the applicant receives a monthly salary of R16 000 after deducting regulatory and other deductions.
That applicant should not apply for any payday loan amount that exceeds R8 000, as this will be denied or offered lower to allow easy repayment.
The National Credit Regulator required payday loan service providers to collect documents that will be used in authenticating the personal conditions and financial status of the loan. Applicants who will further be used in credit assessment.
These documents include the following
- South African national identity document
- Three months stamped bank statement
- Proof of residential address not older than three months
- Latest pay slip from the current employer
Repaying a payday Loan?
A payday loan is repayable in with at least three components. All other forms of personal loans the principal loan amounts are added with interest rates, application, and administration charges.
Although some firms do not charge both administration and services fees at the same time, it is widespread for payday loan applicants to come across both costs. In addition to these clients might also come across late payment fees when their employers delay payments.
The payday loan is paid with a one-time direct debit deduction from the salary of the applicant. This means that whenever one is availed with a payday loan, they should expect to repay the loan within less than a month.
The repayment is explained as the next pay date, which is payday accessed three or twenty days to pay period, they are all repaid on the same period.
Lenders offering Payday Loans in South Africa
Informative books on Payday Loans in South Africa
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