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Responsible Borrowing & Legal Implications to Consider

  • Reminder 1: We at SiFinances promote and adhere to a policy of ‘Borrowing Responsibly and Accountable Use of Loans’
  • Reminder 2: Approval of loans is not guaranteed. Loans are costly financial products and it is recommended to use them carefully.

It is vital for all borrowers of any kind of loan to thoroughly read and understand the Terms and Conditions before they sign on the dotted line and submit the loan agreement. This agreement has information about the exact date on which the loan needs to be paid back by you. In case you fail to repay the borrowed loan on time, then the lender has all the rights to levy varied charges, including late fees, till the entire debt owed by you is repaid to the lender.

Irresponsible borrowing can cause numerous problems, as discussed below.

Please read through it Example of an APR (Annual Percentage Rate) range

There are numerous variables that play a role in determining the rate of interest that borrowers will need to pay for loans. The APR varies as per the location and the credit score of the borrower as well as the qualification requirements of the lender. On average the rate will fall between 200% and 1386% for cash advance loans, and 6.63% to 225% for installment loans.

People with bad or average credit score may have to pay an increased APR as compared to individuals with good credit scores. It may however be noted that the determination of the APR (low or high) is entirely dependent on the lender. All those who seek to avail of a loan have to know that the APR is perennially high.

Consequences of Late Payment

Borrowers who fail to repay the loan on time and without delay are liable to being charged late fees. The amount of late fees varies between different lenders, but it generally tends to be very high. Additionally, there is buildup of fees each and every day till the entire loan amount plus additional charges are repaid in full. It is therefore important for borrowers to inculcate and maintain the habit of repaying their loans on time, on the due date, so as to avoid getting charged any extra charges and fees. Borrowers also need to remember that late payment may also negatively impact their overall credit.

Non-Payment of Loans and its Financial Ramifications

Non-payment or failure to repay the loan taken out by a borrower can result in many financial ramifications, including multiple charges and fees being levied upon the borrower till he/she repays the loan. Borrowers who do not repay the loan amount will remain indebted.

The Rules and Procedures of Debt Collection

The laws pertaining to debt collection procedures and practices differ as per the location of the borrower. Most sellers do not engage in sale of a borrower’s debt to collection agencies situated outside the borrower’s location. Lenders and collection agencies generally try to collect the loan debt via communications like phone calls, text messages, and/or emails. It is however important for borrowers to verify the terms and conditions of the lender for more information about the lender’s collection practices.

Effect on the Credit History

When borrowers do not repay the entire loan amount, then it is most definitely going to have a negative impact on their credit score and credit history. The lender has all the rights to report non-payment of loan debt to any one or even all of the key credit report bureaus.

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Payday loans FAQ

Listed below are some FAQs (frequently asked questions) about payday loans.

What are payday loans?

Payday loans are short-term unsecured loans typically taken out by borrowers between paydays and often paid back on the next payday. The payday loan can be used for any purpose by the borrower.

Can people with bad credit avail payday loans?

People with bad credit can get payday loans. Borrowers need to fill out the application form to find out if they can get a payday loan. The limits to the amount that can be borrowed varied from one lender to another. It is usually calculated by the current debt and the income of the borrower. Most payday lenders permit just one payday loan at one time.

What are the costs involved?

The service charges and other fees for payday loans differ from one lender to another and from one state to another. The rates also tend to frequently change. It is important to check and verify all details of the payday loan, including the terms, the interest rates, and other fees, etc, before taking out the loan. All these details will be provided by the lender.

How to apply for a payday loan?

Borrowers can fill out the application form at the website of the payday loan lender or visit their office/store. In order for the loan to get approved, borrowers must:

  • Have a job and should have been at the job for 90 to 180 days.
  • Be an American citizen and 18 years old or more
  • Have a valid email address and phone number
  • Have an active savings or checking account at a credit union or a bank
  • Have a net (after taxes) monthly income of at least $1,200

Borrowers also have to provide the following documentation:

  • Recent bank statement/statements
  • Recent paycheck stub/stubs
  • Some lenders may ask for a void personal check
  • An ID card like a valid driver's license
  • Recent utility bill with address and name of borrower
  • Legitimate social security card
What is the approval and disbursal process?

The time taken to approve an application is dependent on varied factors. A response is usually replied to the borrower within 5 to 10 minutes of filling out the online application form. The approval time varies from one lender to another; it may occur within minutes or may take 1 day or more. It is also possible that the lender may not approve the loan, though it is quite rare if all requirements are met.

Information about the approval/non-approval is passed to the borrower via email, the internet, or phone.

If the payday loan is approved, the amount gets transferred to the bank account of the borrower via Next-Day ACH funds transfer. Some lenders may provide same-day mobile wallet transfer or wire transfer. The time-frame for disbursal of loan is primarily dependent on the lender.

How is the loan repaid?

A payday loan is usually repaid ACH funds transfer from the bank account of the borrower. Some lenders may take cashier’s checks, debit card payments, or money orders.