Why High Income Earners Use Payday Loans
A payday loan is a short-term loan that has a higher interest rate than a regular loan from a bank or lending institution. However, the credit requirements are less strict than for a conventional loan, and the money is available on the same day of submitting the application in some cases. These loans are very advantageous for people who need cash fast and have the possibility to repay it quickly.
Many people consider payday loans as the method for low income or unemployed people to get cash when they are desperate. This is far from the truth. High income earners also use payday loans to cover their expenses when they have lived beyond their budget or had unexpected expenses that their income couldn’t cover.
Some high-income earners have bad credit because of foreclosure, bankruptcy or divorce. Because of this, it is sometime challenging for them to get a loan. Not so with a payday loan. Good credit is not a requirement for a payday loan. The usual requirements for getting approval for a payday loan are:
• Proof of income
• A bank account
• Proof of residence
When the economy drops, everyone is affected, whether they have a high or low income. A payday loan is one solution that can help overcome emergency financial issues whether it is to pay for your groceries or your car payment. It is an especially good solution for high income earners because they have a good chance of repaying the loan at the next pay cheque and not letting the interest become too much.
Payday loans are not the financial product to use for repaying payday loans; this only compounds debt and will cause huge problems in the long run. If it becomes impossible to repay a payday loan, new methods need to be found such as selling something you own or getting a second job. This can be a temporary solution, so your payday loan doesn’t get bigger but gets paid off.
High income earners also use payday loans because they are fast and easy to get. They may want to go for a weekend skiing getaway but not have the cash to pay for it. A payday loan is the answer. Most loans are approved within an hour after the credit application is submitted. High earners can get the cash they need on Thursday to take off on Friday. This is a great advantage. If they apply online, they can get the money in their bank account the next business day, and if they go to a store, they can get the cash in hand the same day.
The Australian government regulates payday loans to protect the consumer from ridiculously high costs. These regulations include a prohibition of refinancing small-amount contracts. This protects against increasing the borrower’s debt spiral as the borrowed amount increases. Other regulations require the lender to tell the borrower about other short term loan options, and internet-based lenders are required to include a link to the Australian Securities and Investment Commission (ASIC) website at https://www.moneysmart.gov.au/. The Consumer Credit website gives more details about small-loan regulations.
Some Myths about Payday Loans
• There are hidden high fees with payday loans. The lending company will provide clear, transparent fees and charges before the application is submitted.
• Only poor people use payday loans.
• It is embarrassing to get a payday loan because it makes the borrower look desperate. This is not necessarily the case. There are many reasons to use payday loans.
• It is impossible to repay payday loans and the borrower only becomes deeper in debt. If the borrower is careful to borrow the amount they can repay from their next pay cheque, including interest and fees, they will have no problem repaying the loan and will not go further into debt.
Payday loans are the best way for a high income or low income earner to meet short-term financial needs as long as the borrower is knowledgeable and careful.