Payday loans are quite prevalent nowadays, be it buying new gadgets, or a sudden need for cash, everyone is opting for payday loans as compared to the other services available. Before diving deep into the legal aspects of payday loans, let’s talk about what payday loans are. Payday loans are short-term loans generally less than a year, with the repayment mechanism on the day you get a paycheck. The EMIs are deducted automatically as soon as you receive your paycheck. Payday loans are great for improving your credit score and for situations where you need immediate access to funds without much paperwork.
Payday Loans
In general, payday loans require the applicant to just prove the source of income, and the loan is sanctioned, with no extra paperwork, no collateral, and definitely no waiting for the approval, the only drawback for payday loans is that they charge a higher rate of interest as compared to the other loans, but it is justifiable since they provide one with immediate funds. The immediate clearance for the funds is the reason why people are more likely to apply for payday loans as compared to other loans and the other reason is its easy repayment. One need not go fill out the form for the EMI to be deducted, no stressing about it, as it will automatically get deducted from your salaried account. But in many cases, people are gushing over the high rate of interest, especially in the cases where they hear it from someone else, yes there is no doubt about the increased rate of interest on payday loans, but still, the slab of interest rate if regulated by the authorities. The lender cannot decide the rate on its own. Many times people refer to payday loans as bad credit loans as they are widely used to improve the credit score, and are often sanctioned easily even with bad credit scores since all you need to provide is a solid source of income.
Protection For Consumers
To protect the loanee, different measures have been taken by the different authorities, though the measure taken for protection may vary from country to country, some common features are being observed in all of them. As we have seen that these loans are generally preferred to improve credit scores and are often termed bad credit loans, the slab for the interest rate and the minimum income to avail of such loans are decided by the authorities, ensuring easy accessibility of payday loans to every stratum of the society. Moreover, the reason for the loans is oftentimes ignored, as we have seen that these loans are also made available for non-developmental works.
Payday loans are a great initiative taken in the direction of making loans available to all strata of society, and the exploitation of the layman people is also avoided, as they are often regulated by the authorities, thus ensuring the financial inclusion of everyone.