Payday loans or payday loans are a type of loan that is widespread especially in England and Northern Europe. These loans can also be considered as a sort of advance on the salary, as it is possible to request them a few weeks before the next salary is credited and they are usually reimbursed as soon as the salary or salary is paid by the employer. These are loans that are used to meet unexpected expenses just a few days after receiving your pay. Usually these loans have a relatively short duration of one or at most two weeks.
What are payday loans for?
Payday loans are usually used to face urgent expenses such as the payment of a rent or an expiring bill or to face an unexpected expense such as a car breakdown or a visit to the eye specialist. In practice it is a type of loan that is used to deal with any economic emergency a few days after receiving the salary.
Payday loans: how they work
Payday loans are short-term loans (maximum two weeks) with the repayment expected on the next payday, or when the salary is received. This type of loan is issued by financial institutions. The person requesting them can follow the same procedure as the SMS loans or go directly to his financial company, request a small sum and sign a post-dated check on the date on which the salary is collected. The allowance includes the amount requested and the interest calculated on the sum. It is also possible to request the loan directly online by filling out a special form provided by the financial company on its website. In this case the loan will be disbursed directly into your current account and when you receive your salary, the repayment of the debt will be made through an electronic withdrawal from the current account.
Payday loans: Interest rates
As with fast text messaging, the interest rates for this type of loan are very high. For some loans you can even get a 500% rate. In Italy this type of loan is not yet present, as no financial institution is willing to take on such a great risk of insolvency since in our country even those who have a stable job often find it difficult to receive salary by the date set in the contract same as work. Furthermore, many people in our country do not have a permanent employment contract and therefore do not have the security of the monthly pay packet. Often they are precarious workers struggling with project or temporary contracts that do not give any kind of guarantee.
Payday loans: Advantages and disadvantages
The advantages of payday loans are being able to get the salary payday without having pending expenses by taking advantage of a relatively small amount with the possibility of repaying it as soon as the pay is received. In short, it is a great way to be able to cope with some necessary expenses and arrive later this month without too many worries. The disadvantages are all represented by the high interest rates that could complicate not just their plans, as stated in fact for this type of loan, the interest rate can even reach 500% or even exceed it. This leads to a possible difficulty in repaying the disbursed capital, in fact it is often barely possible to repay the interest while it is extremely difficult to be able to repay the requested credit.
Are payday loans loans illegal?
Payday loans are having great success in England and America, but lately there is a tightening on this type of loans due to the high interest rates required by the financial companies that grant them. In fact, these interest rates have meant that payaday loans were declared illegal at least in those countries that provide for an anti-usury interest rate. One of these countries is precisely Italy, which is why in our country this type of loan does not exist, also because in order to be able to provide it banks and financial institutions should study an ad hoc methodology to ensure that they stay within a legal interest rate. .
Realizing this is very difficult given that it is still a case of loans without a strong guarantee, the only guarantee is in fact represented by the salary that is received each month. For now, therefore, payday loans are illegal only in our country and in all those that foresee interest rates against usury, while in England, America and all British countries they continue to be considered legal precisely because they do not apply the anti-usury law so in these countries it is possible to grant loans demanding these very high interest rates.