Calculate how much you can borrow
A payday loan can be a good solution if you need money right away, but you have no reserves in your account. For example if you have to buy a new car unexpectedly or if the washing machine suddenly fails. By borrowing money from the bank, you can still make the purchase, and spread the costs over a longer period. You can take out a payday loan with many different lenders. But how does that work and how do you actually calculate the costs?
What is a lender
You take out a payday loan with a lender. But what exactly does that term mean? The word credit is actually no more than another word for loan, which is often used in the financial world. Providing credit means that you, as a person or company, lend someone a certain capital, usually money, in exchange for a consideration. The consideration is usually the interest that you have to pay on the loan amount. The lender thus earns money from the loan. The most obvious and well-known lenders are banks.
Which conditions apply
There are of course a number of conditions for taking out a payday loan. These ensure that both you and the provider know exactly what the rights and obligations are. Also, the lender will not just lend money to anyone. For example, you must be at least 21 years old to take out a loan and your income must be high enough to bear the monthly costs. Your living situation is also examined. For example, if you live together with your tax partner who also has an income, this may affect the loan.
How much can you actually borrow
The maximum amount that you can borrow depends on various factors. As already described, age and living situation play a role. But your income is of course one of the most important factors. During the term of the loan you must pay a monthly installment, plus an amount in interest costs. If you add these together, you will end up with an amount that you must be able to pay monthly for the entire duration. A stable income that is high enough for this is therefore crucial.
How do you calculate the monthly amount
What exactly you will lose per term, usually per month, is all fixed with a payday loan in advance. There are various websites on the internet where you can make a calculation. You can make a test calculation via these calculation aids. That is a handy way to compare different providers, so that you can make a selection of lenders that offer the most favorable rate for you. The chosen lender can then of course make a definitive calculation for you, so that you know for sure what the loan will cost you.
A financial windfall
And then comes the tax return and you get a nice amount back. You may think it would be wise to put that extra money in the repayment of your payday loan, so that you can end the loan sooner. Although that seems logical, a payday loan often does not allow extra repayments on top of the fixed installments. That has to do with the loss of income by the lender. If you pay extra, the loan will expire earlier and you will pay less interest than expected.
Fixed installments and fixed interest
Paying off a payday loan is done according to fixed installments and fixed amounts. All this is recorded in advance, so you will never be confronted with surprises. The interest is also fixed and can therefore no longer change during the term. The advantage of this is that it provides clarity, since you know exactly where you stand. The disadvantage is that there is no flexibility. Once you have repaid money you cannot borrow again and repaying extra or faster will result in a fine.
Can you borrow if you already have debts
Borrowing money is not always possible. You must be at least 21 years of age or older and have sufficient income. But even then it is not by definition self-evident that an application for a loan is also granted. In case of doubt, a lender can do a review at the BKR. That stands for Bureau Krediet Registration. The BKR is a national agency that registers and keeps track of all loans, or loans, granted in our country. Every lender is required to report a credit granted to the BKR.
A negative BKR registration
If you already have current debts, they are therefore registered with the BKR. You can think of a revolving credit, a payday loan, standing in red or, for example, a mortgage. The BKR also keeps track of whether you meet your payment obligation. This means that it is registered if you always pay late, or if you have payment arrears. A lender can therefore take a BKR test to check whether you have payment arrears on other loans. This test can lead to your loan application not being granted.
Important if you are going to borrow
If you apply for a payday loan and this is also granted, it is important that you adhere to the conditions. By paying each installment on time and paying off the loan properly within the correct installment, you prevent a bad BKR registration. Therefore, take a good look at your financial situation beforehand and make a calculation of the costs of the loan. Only take out the loan if you have sufficient certainty that you will be able to pay the costs during the entire term.