Demand for payday loans is high, with new disbursements increasing by 50 percent this year, exceeding home loan growth by more than 30 percent. However, there are several things to keep in mind when applying, or borrowing can be frustrating in the future. RotateBank collected the five pitfalls that most often made life difficult for borrowers this year.
The retail credit market, including mortgage loans and payday loans, played a key role this year. For the former, the amount of new contracts reached $ 720 billion in the first 10 months of the year, representing an annual increase of 35 percent. payday loans grew at an even faster pace of 50 percent, equivalent to a new placement of $ 383 billion. RotateBank has helped thousands of borrowers with borrowing this year, and based on these, they have compiled the five key points that they need to consider in order to avoid future problems.
How much is needed?
It is often the case that borrowers do not take into account the additional costs, thus underestimating the loan amount. For example, renovation after a home purchase doesn’t always have the money left. As you may, renovation costs increase as you work. There was also an example where someone repaid the purchase price of the apartment from a payday loan but did not calculate the tax.
How much can you fit in?
Before applying for a loan, it’s a good idea to balance your monthly income and expenses. In addition, unexpected costs must be taken into account and the amount of the loan and the monthly repayment determined. That is, so that in case of extra issuance it is not a problem to repay the loan. Eric Tucson, a loan expert at RotateBank mentioned that there is already a legal limit that up to 50 per cent of net income, 60 per cent of monthly income of 400 thousand forints can go for loan repayment, but it is not a good solution it is better to pull the ceiling.
One offer is not enough!
According to RotateBank, relatively many people are already jumping to the first offer or the construction offered by their own bank, although in most cases there are more favorable offers. In particular, because of the demand for payday loans, competition between banks is intensifying, so that more favorable arrangements may come from day to day. For example, RotateBank calculates that, in mid-December, the most favorable one-year 1.5 million $ fixed-term payday loans remain below $ 30,000 a month, while the most expensive ones can have a monthly account of more than $ 40,000.
Banks may impose different conditions for taking out the best deals mentioned, that is, for payday loans with the lowest installment. Many do not look at when to get the best interest. For example, the lowest interest rate is only given for higher amounts of regular income. In practice, this means that if you do not qualify for an income credit after borrowing, even though the payday loan is a fixed repayment, the installment may still increase. It was also an example that stakeholders were not careful when applying for a purchase credit, and it was only later that a 0 percent loan was found to have a shorter maturity. It also happened that the product was paid for with a very high-interest credit card, not a much cheaper payday loan. This made the product much more expensive.
Loans should not be indebted unless necessary and unnecessarily
Interest rates and installments on payday loans have declined significantly over previous years, and there are tempting offers on the market, but it is only worth reaching for a specific goal. For example, home renovation, which is a value-creating investment, means a quality improvement for many years to come, as well as spending due to increased demand for renovated homes. Just like buying a car can be a stepping stone to a more modern, more economical model. Conversely, spending hundreds of thousands or millions on a Christmas gift or travel payday loan can easily go wrong, because on the one hand, the enjoyment that we create quickly goes away and the installments can be paid for years to come. On the other hand, if we are already financing these expenses through loans, they may not necessarily have access to the family budget. In this case, it is worth thinking ahead, saving money and surprising your loved ones or ourselves with a bigger edition just next Christmas.
According to RotateBank experts, loan applicants are becoming more and more aware, as evidenced, for example, by the fact that new retail loans now play a major role in fixed repayment plans for several years. They provide a predictable expense for a given household and do not involve the risk of a possible increase in interest rates. Eric Tucson said that in the next period, the payday loans market could remain vigorous, where fixed repayment schemes could become even more popular.