The concession for this is a high interest rate. These look high on a per annum basis, but seeing as these loans are designed to be easy to pay back within a month, the interest accrued never gets too high. Until you don’t pay it back. That’s when trouble begins. There are two common scenarios for not paying back your loan, the first of which is….
If you pay back your loan according to the initial payment schedule there shouldn’t be any extra costs involved. But even if you do miss a payment, it’s hardly the end of the world and the most likely issue will be that you face some extra interest and/or a late or non-payment fee.
The late fees don’t kick in immediately after default; a responsible lender (like Moola) will give you lots of opportunity to make good again. They’ll call you multiple times over a week or more to negotiate some kind of arrangement to get your loan paid back. Often, if you’re able to make the payment you may be able to avoid any further fees! You will incur the additional day or two’s interest though. (Find Moola’s table of fees here)
This is the second of the two scenarios and this is a much more serious situation. If you are experiencing some form of legitimate hardship (sickness, redundancy, family bereavement etc), don’t bury your head in the sand. A responsible lender isn’t going to just let you get further and further into debt IF YOU TELL THEM! It’s important you work together with the lender to come up with a solution so the sooner you tell them about your change in circumstances the better. Responsible lenders try to provide a fair outcome for all parties.
Although there’s no collateral for the lender to reclaim, many short-term loan companies will get you to sign some form of security such as a wage deduction form as part of your initial agreement. In the event you’ve stopped making payments and are not contactable, the wage deduction is presented to your employer and your payment is made straight from your pay packet. Plus there’ll be a fee for implementing this.
Making multiple late payments or no payments at all will drag down your credit score and jeopardise your chances of securing other loans and agreements in the future. It’s better to make some payment than none, so if you find your circumstances have changed, get in touch with your provider immediately to work out a solution that works for both of you.
Although legislation has made many lenders far more responsible, and at Moola we’ve certainly made a lot of developments in our systems to make the process of applying for a cash loan fair and easy, it ultimately comes down to you. If you think you will not be able to make the regular payments necessary to cover a short-term cash advance simply do not apply for one.