Payday loans are normally charged with a high rate of interest. This can be because of the reason that the loan duration is quite small and so will be the loan amount. Even though it is the most opted loan type for emergency situations, people have some bad opinion about such short-term loan types.
Payday loan is not unethical, exploitative, overpriced and even an unfair transaction between the lender and the borrower. If you look at the principles of LoanPig, one of the most opted loan offering sectors in the UK, you will notice that the rate of interest as set by them for their short term and payday loans types are quite fair ones.
Are Payday Loans Really Unethical?
There are many points that will prove that the payday loans are not a bad type of loan, as people consider it to be. Some are listed below.
- Interest Charged for the Short Term Loans
Interest that is charged to the payday loan amount is actually considered as the price of money that you will be paying for using money of the loan offering institution. Let us learn in a simple way.
You will deposit money in the bank account and the bank will pay you a certain rate of interest. Here, the money that you credit for the bank account is the money that is available for the bank people to utilize, as loan amount for the money borrowers. In return for using your money, the bank will pay your account with the credit on a periodic basis. So, it is like you and the bank people will both get the benefit of money utilization.
- Least Money and Higher Interest Rate
Normally, the people opting for payday loans will be charged with a higher rate of interest. The rate of interest will be so high that the borrower will normally pay more than 100% of the money that they had borrowed. In order to help the people looking for a payday loan, as a way of taking care of their financial issues, the UK government has come up with the idea of not charging borrowers with a higher rate of interest.
The money lenders have started to work with the idea of protecting the borrowers’ interest amount. The money lenders are also coming up with the ideas that can offer wonderful deals for the borrowers.
Direct lender is the company from whom you will avail your short-term loan directly, without any involvement of the third person. They will not charge the borrower with any broker amount, as the transaction will be done between two involved parties. This will help the borrowers to save a great deal of money, which will be otherwise spent as a broker fee.
There are many advantages for the borrowers, if they decide to do transactions with the direct lenders. The direct lenders will never charge you with unnecessary amount in the form of any fee, and will make sure that the documents that you provide as the loan surety will never be revealed anywhere else.
Payday loan is not at all an unethical loan type. This loan type has always proven beneficial for many people in the UK.