What You Should Know About Payday Loan Fees – Our GuideJan 09, 2020
Did you know that South Africans have been borrowing more money in recent times compared to previous years? This study is according to the Transunion Consumer Credit Index – thanks to rising petrol prices and the potential for more costly imports!
From the information gathered, there’s no denying that many South African families are borrowing money now more than ever. While payday loans are readily available for every family in need, it’s also easy for the family’s funds to dry up easily. Although they’re fast, easy, and don’t require a credit check, payday loans come with fees that can impact the family’s financial standing in the long run.
That said, it’s important to know what you’re getting into, as far as getting a payday loan is concerned, which entails knowing all the fees associated with the loan. Below is valuable information on what you need to know about the fees that come with payday loans. Keep on reading to find out more.
Types of payday loan fees
It’s important to know that there will always be fees to pay any loans, whether it is a credit card, mortgage, auto loan, or even payday loan. There are four basic types of payday loan fees that you need to know about, such as the following:
- Initiation fees: As the name suggests, this covers the cost of processing the application and securing the funds for your loan. It is said to be the largest of all charges, which can scale up to the amount you borrow.
- Service fees: From the term itself, this fee covers certain services, such as the communication and general provision of the financial tool.
- Interest: Lenders typically apply interest fees as an annual percentage rate (APR). This is calculated per month and applied to your loan balance over time.
- VAT: Value-added tax covers the tax all businesses must add to a product – which is 15 per cent in South Africa.
The fees mentioned above are said to be standard, governed by law, and strictly followed by all payday loan companies. That said, it is vital that you understand how much the fee is before signing up for a loan.
A realistic example
When it comes to payday loans or any loans, borrowing money always means paying back more than the principal, which is the amount that the borrower agrees to pay to the lender when the loan payment due. Let’s take a look at the example below:
If you need to borrow R2000 for a few weeks, you will need to pay back the initial R2000 borrowed. Given the service provided and how the lenders should earn, you must also pay the following:
- R265.00 Initiation fee
- R40.00 service fee
- R42.70 VAT
- R45.30 interest
To sum it up, the total amount to be paid back is R2393.00 or R393.00 more than what you borrowed in the beginning. This figure is all agreed upon and signed before the approval and release of funds.
Keep in mind that every loan comes with various fees. Whether you seek the loan from an international bank or short-term lender, you should get acquainted with these fees. Always check what the fees are involved in getting a loan and make sure that they are all reasonable.
If you are looking for payday loans in South Africa, Hoopla Loans is your best option. Get in touch with us today to see how we can help.