Borrow money with Payday Loans
If there is still a month left at the end of the money and the tank or refrigerator is empty, then some consumers are looking for someone to lend them money quickly. But lending usually takes some time, and not every bank customer can overdraw their account. Some consumers try a short-term credit – but it comes expensive. See sedword.com for a summary
This is how short-term loans work
The providers of short-term loans usually give only small sums between 100 and 600 euros. For new customers, the maximum loan amount is lower, who has often borrowed and repaid money, gets more.
The term of a short-term loan is usually 30 days, sometimes it is also 15 or 60 days, if the customer wants to repay the loan in installments (installment option). The sum pays the customer in one fell swoop at the end, loans with installment option are the exception. Thus, such loans are more for the interim financing of sudden emergencies, which can not wait until the next salary, but could actually be paid with these.
In Germany, short-term loans are still poorly known; in the Anglo-Saxon language area, such as Great Britain, the so-called payday loans are granted much more often and have been more heavily regulated since 2014. Major British providers such as Zengga, The Shoppe Cash and Cash Gose have already become the focus of the UK’s Financial Services Authority due to their business practices. They had to pay compensation to their customers. For example, Zengga forged letters from law firms and sent them to clients who did not repay their loans on time.
For example, Zengga charges an APR (Annual Percentage Rate) of 1,500 percent, and Shoppe Cash 730 percent. Behind the APR is the effective interest rate together with the financing costs of the loan.
These providers exist in Germany
So far there are only three short-term credit intermediaries in Germany: Neofunding, Viloan and FastCredit. All three work together with a bank for lending.
Neofunding is the German Net-m Privatbank 1891, Viloan is Nova Bank Limited of Malta and FastCredit is Zaloan Bank, also from Malta. Neofunding offers over Kreditup also short-term credit for self-employed, which, however, it goes to much higher loan amounts than the parent company.
At FastCredit the loan is subject to Maltese law; however, the company claims that German consumer protection rules still apply. The laws of Malta also apply to Viloan, but the terms partly refer to German law. This can lead to problems in a legal dispute – under certain circumstances, a German court would first try to clarify the Maltese legal situation.
The providers are not only on their own websites, they also distribute the loans on the comparison portal Verivox via a redirect.
Dispo interest. However, you have to pay the short-term loan interest for the entire term, the MRP interest only so long until the next money is received. And while bank customers can go straight into the debit, consumers have to wait a few days for a short-term loan. Unless they pay considerably more.
High fees for a quick transfer
Short-term loans are by no means instant loans. There may be days between the loan application and the receipt of the money. In an emergency, those affected often need the money quickly. This is also possible with the credit intermediaries – against extra payment.
Viloan – For a normal loan, Viloan will process the application within three business days, the money will be transferred four days after approval. If customers want to have the money in the account as soon as possible, the provider recommends new customers the new customer deal for 39 euros, which includes the service of direct decision, preferred processing and flash transfer. Viloan then transfers the money within one day. For existing customers, the similar combination of express processing and flash transfer costs even 75 euros.
Neofunding – If borrowers at Neofunding apply for the loan without an additional service, the money will arrive within two to four days. With the express transfer this should already happen within 30 minutes. Neofunding charges 39 euros regardless of the loan amount for such transfers.
FastCredit – According to the provider, customers have the money in their account within 24 hours if they pay an acceleration fee. The normal processing time is 15 working days. For fastcredit the fees are graduated depending on the amount of the loan: 22.50 euros for amounts of less than 100 euros, 45 euros for amounts of less than 300 euros, for amounts beyond 99 euros.
The quick help in an emergency is so very expensive. Neofunding justifies the amount of the fee by including the cost of an express or lightning transfer; Viloan refers to the fees as standard, FastCredit as adequate.
The fee is not included in the effective interest rate because it is an additional eligible service. We calculated a fictitious annual effective interest rate on the monthly costs (interest and fees) to make short-term loans comparable to other products. The compound interest effect over the months is included in this type of calculation, even though the short-term loan should be fully paid after one month. However, Gudrun Brangwen also calls the effective interest rate for the credit line.
An example is a new customer who lends 500 euros for 30 days.
Cost of 500 euros express transfer
|Total cost:||44.45 €||44,38 €||103.07 €|
|effective interest rate in the year¹||178%||177% (new customer deal)||878%|
Service they need. However, customers can not do without the fast transfer in an emergency.
Installment fee is extra
The repayment in installments is not provided for the short-term loan. But the credit intermediaries also offer their customers this option for a fee. In most cases, there are two installments, with Neofunding existing customers can also pay off their credit over six installments. Neofunding and FastCredit charge 49 euros each and Viloan 39 euros extra.
The installment option extends the term to 60 days. Although customers have more time to repay the loan, the financial burden of the loan grows considerably because of the fees. Just when consumers needed the cash injection due to an emergency, these costs make it more difficult to straighten out the finances.
The creditworthiness must be right
The interest rate on short-term loans is usually credit-independent. That is, every customer gets the loan on the same terms – if he receives it.
Viloan – This provider gives loans to consumers who are between 21 and 75 years old, have a “monthly, stable income” of at least 700 euros net and are not insolvent. The broker proposes a service to customers to find out if they would get a loan: If they actually get the loan, this preliminary decision costs 19 euros. The provider made no information on the default rate on the loans.
Neofunding – At Neofunding, borrowers must be at least 18 years old and have a fixed monthly income. There must be no outstanding liabilities that are not in bankruptcy or over-indebted. Anyone who has not been able to serve installments and has therefore been forced to pay an affidavit to the tax office, landlord or bank to disclose his financial circumstances will be unable to pay Neofunding.
With the so-called credit rating certificate, consumers are told before the loan application, whether the chances for the assumption are good. There are even 10 percent of the loan amount as a fee, if an applicant gets the loan. According to its own information, Neofunding is aimed at customers with a private credit score above the rating D. The provider calculates a credit rating that refers to smaller sums and shorter terms. With this, Neofunding tries to convince the bank of the customer.
As a rule, customers pay back the money in the end: According to the company, the default rate of its loans is about 4 percent.
fastcredit – fastcredit restricts the customer group to 18- to 69-year-olds. They must have handled their “money matters responsibly”. According to Zaloan Bank, three out of four customers repay the loan on the due date.
In addition to intermediaries, banks also offer products similar to short-term credit. However, Fidor Bank pays out such loans only to those who are already customers; at the Targobank the term of the short-term loans is at least 60 days.
Fidor Bank customers can use the cash emergency call to borrow $ 100 for 30 days. Anyone who has already paid back a money emergency call can borrow 199 euros and pay back the amount after 60 days. In both cases, customers have to pay 6 euros – a high price for these low loans. But who needs the money quickly, pays less than the intermediaries, since the corresponding fee is eliminated.
Targobank’s direct money is a mixture of short-term credit and normal installment credit. The bank will award credit amounts of 100 to 3,000 euros, and customers will pay back the money in two or more monthly installments. With 8.95 percent APR, the credit of Targobank is a lot cheaper than the competition. There are no costs for the rates, but for the express transfer. The Targobank requires 25 euros.
Alternatives to short-term credit
Short-term loans are by no means the only way to borrow money. But not every possibility fits the situation; after all, many consumers only need a little money for a short time.
Credit Loan – The credit line is more flexible than the short-term loan, because bank customers can always access and repay it at any time. They are not tied to him for 30 days, so despite the similar interest rates, they can be far cheaper. However, self-discipline is necessary: Consumers should compensate for the expensive dispo despite the lack of commitment quickly, so as not to burden unnecessarily long. In addition, banks can reduce or cancel the credit line. Some banks also tolerate it when their customers overdraw the discount framework. How long they allow this, however, depends on the case; Consumers should therefore talk to the bank.
Frame Loan – A Frame Loan is an alternative if consumers know that they will need more money soon. It is cheaper than the short-term or the credit line. Customers can use the credit line flexibly and settle the amounts in installments or in one fell swoop, which is why they also need discipline in repaying this loan. For sudden emergencies, the credit is due to the necessary lead time nothing. Another night part: The interest rates can change.
Friends and Family – It can be uncomfortable to ask friends and family for help in emergencies, but it has many benefits. The credit check is eliminated, there is no private credit entry and consumers negotiate the personal loan itself on interest, conditions and collateral. But you should do that seriously – maybe even set up a small loan agreement. It is not for nothing that the friendship ends with money.
Employer and landlord – Anyone who has a good relationship with his employer or landlord can negotiate with him on an advance on the salary or a delay in the rental payment, if it is in short supply on the account.
Installment Loan The Installment Loan is not an alternative to short-term credit, despite much lower interest rates. The loan amounts are too high, the terms too long. Also missing is the fast transfer service, instead, customers have to wait a few days for the money.
Offers from credit intermediaries – Credit intermediaries creditend and Portalose are offering promotional loans, which are an alternative to short-term loans despite their 36-month term. Because the loan amount is 1,000 euros low for a installment loan, the interest at 0 percent even lower. But even with these loans, there is a waiting period.
To reclassify loans, the sums are too low and the interest rates too high. For the consumption of any loans is absolutely inappropriate, even if Viloan as an application “suggests the hamster of low-priced clothes” and fastcredit gifts or shopping.
If you have more lead time you should first try to get a lower interest frame loan. If banks do not grant you a credit line and you, as a bank customer, do not want to use the MRP, then the short-term loan can be a way to borrow money. If you need a little money quickly, the short-term loan is very expensive due to the high additional costs and only in exceptional cases an option. In any case, you should be sure that you can repay the loan at the end of the term without any problems.
Because if you delay the short-term credit or do not pay at all, there are further costs. These include default interest or fees for letters of formal notice. At FastCredit, for example, they are so high at 5 euros per letter that they may be inadmissible. The providers can also pass on the claims to debt collection companies.
That’s why you should not underestimate the impact of a short-term loan on the financial situation. Although the sums are smaller than the installment loan, defaults are being sharply pursued, as with other loans. The agents also report a non-repaid loan to private credit, which may give you more problems.
If a consumer repeatedly needs short-term loans to get over the month, no credit will solve the problem. A household book can help to keep an eye on the finances, in difficult cases, the course helps to debt counseling.