What is a Pay Day Loan?

Mar 07, 2016

Have you ever been in a pickle? Perhaps your geyser burst? And to top it off there was more month than money.

A Pay Day loan could be the answer. But, first things first -

What is a Pay Day loan?

A Pay Day loan is to supply cash on demand with your next paycheck as payment. It is often referred to as a quick loan, instant loan or short term loan.

A Pay Day loan is also another form of an unsecured loan. But, adding to that we might add you can see your next paycheck as ensuring the payment. If you work until the next paycheck that is!

It is still a basic loan. It consists of:

  • A payback period of a month
  • An interest rate.
  • An instalment.

Some credit providers may allow up to 45 days of repayment. The Pay Day loan is not designed to finance big expenses like the purchase of a house or a car. Therefore the repayment is scheduled over a short timeframe.

The NCR is on your side when it comes to Pay Day Loans. They have limited Pay Day loans to not have interest rates of more than 60% per annum. The interest rate may seem high when it’s compared to other types of loans and there is a good reason for this. Pay Day loans are high risks for credit providers since the success of the agreement rests on one payment only. Added to this is the fact that the loan is unsecured – no asset will cover the outstanding balance of the loan.

One instalment, your next paycheck, will settle the debt.

The size of your salary plays a big role in determining the amount of the loan and the amount of the repayment. Please note that many credit providers give preference to returning customers. If it is your first time applying, you may only get a loan of R3,000 to R4,000. Returning customers - with good credit records - may be eligible for loans of up to R8,000. That’s a healthy boost in trust!

Your credit record is still of high value.

But in this case, the details most needed are your employment details. These credentials determine your eligibility for any Pay Day loan. A Pay Day Loan is fast cash, for a quick solution, but be aware of the applicable interest rate. Shop around on the Fincheck loan comparison page and find the Pay Day loan that fits you best!

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