Almost all of us suffer from cash shortages at some point or other. We all always plan and manage for the planned expenses, there are some unplanned expenses which require an immediate attention. It does not allow us any time to defer the situation and demands an instant money inflow. At this point of time people general turn their head towards payday loans which provide the money almost instantaneously.
The payday loan is a short term unsecured loan for a small period of time ranging from 2 weeks to 4 weeks. Ideally is required to be paid off by the next pay date. The borrower usually provides a postdated check to the lender which can be presented in the bank on the next pay date. The amount of check is inclusive of all the interest, fee and applicable charges. A lender checks the borrowers’ application against some basic qualifying checks like the applicant must be into a legal job and a legitimate resident, above 18 years of age, and the monthly salary should be above a specified threshold.
The various safeguards include the following points as below.
• The regulation requires the payday lending institutions to have a license
• The rate of interest of the loan should not exceed 23% of the loan amount
• Each lender to obtain separate license for each location they conduct the lending business
• Even the loan broker who broker the payday loans are also covered under this regulation
• Various guidelines have been laid out for the payday lenders for the capital and financial requirements.
Each lender must comply with such requirements.
• The agreement for the entire loan contact must be in writing and signed by the borrower
• It also provides the disclosure requirements which a lender should share with the borrower at the time of loan contract
• It also prohibits payday lender to levy additional charges in case of any loan extensions or renewals.
• Disallows any kind of discounting of payday loans
• It also disallows taking any collateral’s against the payday loan
• No rollovers are allowed
• Loans over 50% of borrowers net pay cannot be authorized
• Collection practices are governed by “The Collection Agents Act” which directs the appropriate collection practices.
Payday loans in Saskatchewan has created a big market for itself as the above guidelines make it a consumer friendly product. But in spite of having a tight noose around this product, it is advised to a borrower to evaluate all other options.
Some of the options which the borrower can look forward to before applying for a payday loans are
• Borrowing money from close friends or family is the easiest and simplest way of borrowing money. The mutual agreement allows plenty of consideration for the financial situation and thus there is a higher flexibility involved along with the convenience.
• Another workable option can be approaching the same bank where the borrower has maintained a bank account. The bank is very well aware of the financial health of the customer and by looking at the bank transaction details is easily able to gauge the recurring salary inflow. This can help the customer to secure money from the bank directly with the borrowing cost significantly lower.
• Approaching a non-profit credit union can also be considered as a good borrowing option. The borrower can definitely save on the interest cost.
A prudent financial management is a must to every individual. Each of us should prepare a monthly budget and must not cross the line by unleashing our temptations and impulsive spending behavior. One should look at all the financial aspects and compare all the avoidable as well as unavoidable expenditures. By doing such classification and working on prioritizing expenditure allows a judicial use of the limited salary. This not only saves the person from current set of financial difficulties, but also acts as a shock absorber to future financial difficulties.