Wonga payday loans can smoothly cross you over a financial bottleneck you are experiencing especially if you are bad credit consumer and cannot get financial assistance from the depository institutions or banks. From reality, it seems that consumers are getting the helping hand they need when they are faced with a troubling emergency for money. These bad credit payday loans have become the crossing bridge for many borrowers who are turned away by banks whenever they desperately need money.
This is certainly one reason why borrowers keep on using these credit facilities despite the fact that they attract very high interest rates. And as wonga sets it straight, “We will always tell you what the full cost of repayment will be upfront” and as though this payday loans lender is not afraid, goes ahead and point out that “Our service has a Representative APR of 4214%” The big question is; how can this such high interest rates be justified?
Consumers need to prepare themselves and learn how to maneuver the hard times. Although wonga tries to defend itself and justify that this is an annual measure of APRs and that their payday loans are not intended for a 12 month period but only one month, the rates are surely high. In addition, wonga claims that this percentage they have given out assumes a theoretical compounding, which means that a borrower rolls over the balance and therefore the interest rate is charged on the accumulated balance and not the principal amount that was initially loaned.
A wonga loan is structured to be due between one day and a month; period. However, like other next paycheck credit facilities, they are no longer serving the intended purpose. A payday loan that is only meant for two weeks could be rolled over for up to one year. And the repercussions are huge. Even those who pay their loans within the two-week period, they head back to the same lender to take some more.
According to a research done by the Consumer Financial Protection bureau, it showed that about 13 percent of borrowers were taking out a maximum of two payday loans in a year. Similarly, about one-third of borrowers were taking an estimated 11-19 different payday credit facilities in just 12 months. This clearly demonstrates that payday loans are no more short term or one-time borrowing credit facilities.
There is the danger of being trapped in a vicious circle where you have to keep on borrowing in order to make ends meet. The problem is that the high interest rates eat up the little income you earn every month and you are left with a deficit and you cannot meet your regular bills and expenses like food stuffs, rent, gas, electricity, telephone, and other monthly bills.
Therefore, the chances of going back to obtain wonga payday loans is very high. It seems that payday lenders are grooming their customers for a repeat business not knowing how they are destroying their lives. There are many options that consumers need to take in order to steer clear of these cash advance loans because they are not sustainable.
First, you need to set up an emergency cash account and make it a strict saving behavior. In addition, today there are bad credit cards, which can allow you get some credit against the cards. Although missing credit card payment can attract high interest rates penalties that may hike your APR to as high as 35 percent, this is annualized APR and therefore, if you break it down to two weeks or one month period, you find that it is something negligible.
Wonga loans can only serve their purpose if you take only one or two of these loans in one year but this is practically not happening to most of the consumers. They are trapped in a vicious circle of borrowing again and again with many taking as many as 20 or more loans per year.
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