Thursday, 22 October, 2020

Payday loan|Finance & Capital Market

Finance and capital markets Compound interest basicsCompound

I think most people would think Payday loans are not the best option for loans It is likely to be in need of money Charge a high fee. What I want to do in this section is Explain what’s going on and do some math. Let you really understand the interest they charge. How unreasonable, Assume this way I need to buy a beautiful birthday gift for my wife tomorrow. I need to borrow 500 dollars. So i want to borrow 500 dollars I infer Most people do n’t borrow for a gift. They may be paying rent or utilities Or food or something to borrow. But no matter what your reasons are You need to borrow 500 dollars i infer, Not much money in your bank account Otherwise you wo n’t go to the payday borrower. They said okay Sal, we are willing to lend you $ 500 About your credit status and related content. We will not do a thorough investigation But we want to know a few things.

First we want to know your payslip and payday. They want to see your payslip They want to know when you get paid. We call it your payday They may need a recent bank statement. The reason they want these things is They want to know what you know Even if your credit is poor . Then you will get your salary Or payday in two weeks You will get paid from the boss Then you can repay the $ 500 in arrears. To ensure this So they want to make sure you have a job Get $ 1,000 every two weeks on your payslip Or $ 2,000. So that you can pay Maybe you make $ 1,500 every two weeks. They love seeing these Maybe from the day you borrowed Your payday is two weeks. So two weeks from today And your bank statement shows $ 1,500 more in your account You pay rent for food. Then the account balance is close to zero again. Then it rose to 1500 again But they want to see. This $ 1,500 is paid regularly. They say you know We will lend you 500 today. You need to write a check Not writing a $ 500 check .But write a debit note for every $ 100 You need to pay an extra $ 25 Extra $ 25.

At first you would say that’s good 25% interest rate Higher interest rates compared to credit cards But this is not an annual interest rate of 25%. At the end, I will compare What is the adult interest rate What is the effective annual interest rate. These numbers are not outrageous These are actually typical for payday loans. So if I borrow $ 500 I have to return $ 500 in two weeks Plus $ 25 for every $ 100. So I borrowed $ 500 I will have to pay an additional $ 125 25 times. I will write a check for $ 500 plus $ 125 That would be $ 625. Obviously, there is not so much money in my account now Otherwise I wo n’t go for a payday loan. I have to fiddle with dates. I will postpone the date of this check. I will write the date Assuming this is the beginning of the month Or suppose it is January 1st I will write whatever year is January 16th I have postponed it for two weeks from today. In the next two weeks Then i sign this check I write a payday loan. I wrote $ 625 and so on Then here is some information I give them this check They will say we will not honor it We just keep this small and cute check. When your payday is up you can make a choice. You can come to us and pay us $ 625 in cash Then we will return this uncashed check to you Or if you do n’t show up We will honor this IOU. So one of these two things will happen But in fact If you don’t lie to them. They will basically charge you $ 625 You would think it was risky for the lender Because the borrower may have low solvency Obviously the borrower has run out of ideas.

So they are not good at managing their property But they do their best to make sure Once payday comes. Once I get my salary from the boss Before you pay rent for utilities and food. They can get the money and finance. first That’s the basic concept of payday loans. Now we start discussing this may not be a good idea You should know about this Because we pay a 25% interest rate every two weeks Instead of every year. We consider what that means based on the annual interest rate. Let’s say I pay $ 25 for every $ 100 Is the real 25% interest rate, When you say percentage, the root means 100.

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