Emergency loans, short term loans, quick loans. Pay day loans are known by many names. Whichever terminology you prefer, payday loan agreements offer a fast and efficient way to access personal funds when it is needed the most.
Given that 76% of South Africans regularly run out of money before the month ends, millions will view pay day loans as an attractive financial instrument. As a first-time applicant, it’s important to familiarise yourself with the features of short term loans.
In this guide on what to know before taking a payday loan, our experts will answer all of your key questions, such as;
- What are payday loans?
- When are emergency loans useful?
- How much can I borrow with short term loans?
- How long do I have to repay quick loans?
- What are the financial implications of pay day loans?
What is a Payday Loan?
Payday loans are personal loans that typically focus on borrowing a relatively small amount of money for a short period of time. They are primarily designed to help applicants out of temporary cash flow issues while they often allow borrowers to access funding within hours.
Quick loans additionally offer excellent accessibility, keeping the door open for people who have failed to borrow money elsewhere due to low credit scores. Moreover, the brief nature of the agreement makes it more practical than a longer loan that may lead to problems should you lose your job in the coming months.
How to Get a Payday Loan
Understanding the fundamentals of a payday loan is one thing, but knowing how to get a short term loan is another. At MyMulah, the loans are open to all applicants aged 21 or above, who have a proof of ID and income as well as an active checking account.
To secure a quick personal loan, you simply need to;
- Select the amount of money you’d like to borrow.
- Complete a quick and easy online assessment.
- Wait for your funds.
Following this, your only obligation is to make the repayments as per the financial agreement.
When to Use a Payday Loan
Payday loans are a very useful financial tool that provides instant financial relief at times of urgent financial needs. The most common examples are;
- To cover emergency medical bills.
- Pay for home repairs like plumbing, which costs an estimated R800.
- To pay bills after a delayed payment from your boss or client.
- Cover other one-time unexpected costs.
Whatever the reason, it is a fast and streamlined way to secure funds in times of need. It provides financial flexibility, which can save you a lot of time and prevent immensely stressful situations.
When Not to Use a Payday Loan
While payday loans are a great option for solving various temporary financial issues, there are several times you shouldn’t use them. They include;
- Luxury purchases.
- To cover existing loans.
- Gambling.
In other words, you should only use a short term loan when it is needed.
How Much Can I Borrow with a Pay Day Loan?
The next obvious question that applicants must ask is: How much can I borrow through a payday loan?
Firstly, it’s important to use a licenced payday lender that is 100% transparent. Otherwise, using an unofficial lender could bring serious consequences and stresses, especially if they decide to change the repayment terms.
There are many different lancers who offer quick loans, with each setting their own limits. However, the majority offer smaller maximums to beginners looking for their first time short term loan. Many also restrict available borrowing based on credit checks and other factors.
At MyMulah, applicants can borrow up to R2,500 when borrowing funds for the first time. This figure then increases up to R8,000 over time. The transparent limits make it easier to make a calculated choice as to whether the small loan is aligned with your needs.
How Quickly Do I Have to Repay a Short Term Loan?
As a new payday loan user, it’s not only important to confirm that the level of funding is suitable. You must also consider the repayment timeline to confirm that you are capable of settling the debt in the agreed timeframe.
Once again, different lenders will offer contrasting borrowing and repayment terms. At MyMulah, it is possible to borrow up to R2,500 for up to 31 days. However, it should be noted that the interest payments are significantly reduced when the duration of the agreement is lower. For example, a R2,500 loan for 31 days will include interest charges of R683.90 while a seven day loan has interest payments of R414.86.
Any applicant should calculate the soonest time that they could repay the loan without putting themselves under unnecessary financial stress.
The Financial Implications of Payday Loans
Emergency loans are an ideal solution in many situations, not least given South Africa’s current economic climate. In truth, millions will find that payday advances are required at least once in their lifetime. When used well, they can save you from;
- Not being able to pay for medical care.
- Allowing small home faults to escalate into more significant damage.
- Facing late payment charges on bigger accounts.
- Experiencing credit score damage.
- Sleepless nights and damage to your health.
However, quick loans aren’t a financial tool that should be taken lightly. It’s imperative that you implement responsible borrowing by only taking out an agreement you can afford to pay off.
After all, taking out the additional debt appears on your credit file while any missed payments will see your score fall. Similarly, the total repayment increases when you miss payments and extend the duration of the loan.
The good news, though, is that satisfying the debt and clearing the credit agreement within the 31 days shows that you have managed borrowed funding well. In turn, your credit score will increase – although you should avoid using short term loans too frequently.
The Final Word
If you are experiencing a temporary cash flow issue due to unexpected costs, a payday loan can get your finances back on track without requiring a longer term debt. However, it’s important that you reach the right agreement with a fair and licenced operator.
To find out more about borrowing up to R2,500 with an almost instant payout, contact the MyMulah team today.