Sometimes your finances won’t last the month. Sometimes, despite your best budgeting, an unexpected expense like a car or doctor’s visit can cause you to be short of cash. You may feel tempted to borrow a payday advance when you’re in dire straits and have little money to get by until payday. They’re the ideal solution and clear choice for this type of situation.
Payday loans aren’t as convenient or low-cost as they appear to be. This article will explain why payday loans in South Africa payday lenders are usually expensive and best avoided. Next, we’ll look at an option.
What is a pay-day loan?
Payday loans can be short-term unsecured loans. They are available to anyone who needs money quickly to cover unexpected expenses. These loans are typically paid off within a week. The repayment amount is then deducted from your bank account.
The cost of a payday advance
Because payday loans require a small amount to be paid back within a short time, it is easy to fall for the illusion that payday loans don’t present any risks. The fees and interest rates for these loans are much higher than most other types of loans, making them an expensive option. South Africa charges borrowers upto 5% interest per calendar month. Although this might seem small, it can add up quickly. You could pay more than R400 for administration fees on a R2000-loan.
Due to the high costs, a payday will not help you solve cashflow problems, especially if your financial situation is already dire. The cost of another loan will cause your expenses to go up and put you at risk for financial hardship. Even worse, if your previous debit orders were in full before you applied for your payday loan, repayments can drain funds that you had set aside to pay another debit order. A bounced debit order could have a negative effect on your credit history. Future loans will be more expensive because of this.