Are you living in Poland and affected by the general economic condition? Then payday loans are a great answer to your problems. Payday loans or popularly known as Pozyczka bez bik in Poland, are definitely easy to obtain. However, there are a few factors to consider…
One important consideration in deciding whether to apply for any kind of loan is the interest rate that comes with it. For payday loans, this is even more important. To understand why this is so, you first need to know the nature of a payday loan. Essentially, this type of loan is one where a person borrows an amount of money and uses their paycheck as collateral. The total amount of the loan is broken down into smaller amounts that are each due within a predetermined payment period. Normally, each payment period lasts two weeks; with the due date being the day the borrower expects to receive his salary. When the said due date arrives, the borrower has the option of either personally making an appearance to pay the amount due to the lender, or having a post-dated check, which was left as collateral upon taking the loan, cashed by the lender. Exactly how much does a person pay during each payment period? This is where the interest rate comes in. A person would be gravely mistaken in thinking that only the actual amount of the loan becomes due.
Payday loan interest rates may vary from one jurisdiction to another. They are computed on an annual basis, which is why they are referred to as an Annual Percentage Rate of Interest (APR), and are applied to all payable amounts making up the total loan value. For instance, a lender may charge 15$ for each 100$ in a 300$ loan. Here, the 15% interest rate only refers to one payment period. To know the true APR value, you need to factor in the loan’s payment period, which in this case, is two weeks or 14 days. By multiplying 15% by 26 weeks, which is the number of bi-weekly periods in a year, the APR is 390% for a 300$ loan. Yes, a whopping 390%, which is only average in the payday loan industry. Unless a certain jurisdiction specifically puts a ceiling on the rate of interest a lender can apply on a payday loan, APRs can even be as high as 500%
Staggeringly high interest rates make payday loans a risky financial undertaking. In fact, many financial experts advise people to stay away from this type of loan altogether, as it can potentially aggravate one’s debt situation. Hence, if you intend to get this kind of loan, you must make sure you have the capacity to pay within the given period to avoid the compounding effect of interest rates and other penalties.