The number of payday loans advanced by lenders has increased quite considerably over the last few years.
This growth has been achieved at a time when consumer
groups have been discouraging the public from borrowing these loans due to the
high interest rates charged by lenders. This is a testament to how helpful this
credit facility can be.
Numbers never lie, so when a consumer group claims that some borrowers may end up paying more than a thousand percent interest on the loan, this is not totally wrong.
However, this is not necessarily the lender's fault. Lending companies only
award payday loans according to certain terms and conditions. Failure to repay
the loan or honor the agreement in any way is what may lead to a rapid increase
of the interest rate.
Consider the following case. A person borrows 500 Pounds, or whichever currency, and is required to pay 550 at the end of the month. If this person clears his or her credit account at the end of the month, the interest rate will translate to 10 percent per month.
If a person fails to pay instant fast cash loans back at the end of the month, a second fee will be
charged on the outstanding balance. If the loan is not cleared at the end of
subsequent months, the outstanding balance can increase exponentially.
Responsible lending can only be achieved if borrowers are also responsible. Those who borrow and pay on or before the due date of the loan know exactly how helpful payday loans can be.
The government through its agencies has put in place measures to protect borrowers from irresponsible lending. While credit checks are not a requirement,
lenders are required to ascertain whether or not prospective borrowers have a stable income source.
By making sure that the average monthly income of the borrower far exceeds the borrowed amount, lenders will be able to recover their funds because borrowers will be able to repay the loan comfortably.