The quick loan advertisements are everywhere - on the radio, TV, Internet and in your mail box.
You will quickly notice that as soon as you have been in most western countries for a little over six months, a lot of mail will come in your name. This includes loans till payday mail.
This is because a bank and other companies, which you have given your details, will have sold your name and address.
You are also likely to spot a payday loan company in the less affluent parts of your city.
Payday loans come at a very high price. Avoid them!
Other terms used to describe the loans are - cash advance loans, check advance loans, post-dated check loans and deferred deposit check loans.
Individuals who carry out these businesses are referred to as shylocks, loan sharks, check cashers, etc.
They make small, short-term and high-rate loans targeted at individuals who are experiencing temporary or long-term cash flow problems.
Typically, a borrower writes a personal check payable to the shylock for the amount he or she wishes to borrow plus a fee.
The shylock gives the borrower the amount of the check minus the fee.
Fees charged for cash advance loans are usually a percentage of the face value of the check or a fee charged per amount borrowed - say, for every £50 or £100 loaned. If you roll over or extend the loan, you will pay the fees for each extension.
In most countries, you must receive - in writing, the finance charge and the annual percentage rate or APR (the cost of credit per annum).
A cash advance loan secured by a personal check is very expensive credit. No credit checks are carried out to verify your financial standing.
You may write a personal check for £115 to borrow £100 for up to 2 weeks. The shylock agrees to hold the check until your next payday.
On your payday, depending on the agreement, the moneylender deposits the check in his account or you redeem your check by paying £115 in cash.
You can also rollover the check by paying a fee to extend the loan for another two weeks.
In the above example, the cost of the initial loan is a £15 finance charge and 391% APR. If you rollover the loan three times, the finance charge would become £60 to borrow £100.
As a student, do not go down that road. Leave your country when you are fully prepared for life abroad. Make adequate plans about your finances.
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