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How to pick a pay day loan provider

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It should not come as a surprise to learn that not all credit card issuers are the same and that not all banks are equal either – Therefore, it is fairly obvious that pay day lenders will not be the same either.

There are many pay day lenders out there and it can sometimes be difficult to appreciate the differences between them.  When you are in urgent need of cash and are stressed about finding money it is all too easy to go with the first pay day loan company you see.  However, it is worth doing your research because that way you may get more favourable terms of lending which means less debt in the long term.  There are other considerations too.  So, what should you look out for when considering taking out a pay day loan?

The amount you can borrow:  All lenders will usually have a minimum amount you can borrow.  However, how high that minimum amount is differs.  Do not choose a pay day loan provider who insists on lending you R250 when you only need to borrow R100.  Borrowing more than you really need is a bad idea and will only increase the amount of interest you have to pay. 

Length of the loan:   A good lender will let you borrow for a period which is as short as you require.  You might only need the loan for a day – why would you want to pay interest for days which you didn’t need the loan for?   Choosing a lender who lets you pay back your debt early with no hidden fees is sensible.

Hidden fees:  Obviously borrowing money doesn’t come for free.  Pay day lenders are a business like a bank after all!  Be cautious when calculating how much you will have to repay.   Ensure that you know how much both the interest and fees will be.  The way www.Wonga.co.za have set out their website is clever.  The first thing you see on their website is a sliding scale which you use to see how much the borrowing will cost you. You can adjust the amount borrowed and the number of days you require the loan for and see overall cost of borrowing change. Ensure the fees include 14% VAT. 

The credibility of the lender:    Chose a lender who is reputable.   They should be a registered credit provider and should be regulated by the National Credit Act. 

The interest rate:  This is obviously also important but is not the only factor to take into account.  A better way to assess who will give you the best deal is to calculate the overall repayment figure.   Some lenders may encourage you to take a loan of a larger sum of money or for a longer period of time at a slightly lower interest rate. If you did this you may actually be financially worse off when it comes to the repayment. 

Speed:  If you need money in a hurry choosing a lender who takes too long to process your application and send you the money will be of no help!  That said, don’t let the speediness of some lenders make you neglect to go through and consider the issues set out above which will affect your borrowing and your debt.