Much is said about payroll loans as a cheap option for those seeking a loan. In addition, reducing the interest rate ceiling for this type of credit has reaffirmed it as the cheapest line in the market. Still, consumers still need to take care that this credit does not hinder them more than help.
Payroll Credit Care
1. When hiring a payroll deductible loan the consumer does not have an analysis of his percentage of income committed to the loan, nor his financial ability and his needs. It is very easy to sink into debt without this care.
2. The consumer does not see the pros and cons of the contract, as this payroll loan is often taken even over the phone. The consumer knows how much to take, the value of the installments, but ends up not seeing what is involved in that loan.
3. Income compromised for a long period. Payroll-deductible credit is generally offered for long-term payments, which means that debt remains long as part of consumer spending.
4. Difficulty in early discharge. Unlike in payroll-deductible personal loans, payroll-deductible loans make it very difficult for consumers to apply for early repayment that guarantees a reduction in interest on the credit operation.
5. Lack of contract documentation is also among the main problems. In addition to the fact that the consumer does not often see the contract before taking the credit, he continues without having the same even after starting to pay the installments of the payroll loan taken.
6. Impairment of income out of control. Banks often allow a consumer to borrow paychecks even though they have 70% of their income committed to debt. This type of practice leads to the huge indebtedness of public and private payroll loan lenders.
As we have already pointed out, payroll-deductible loans carry an excellent interest rate, as installments are discounted directly from the consumer’s payroll, which reduces the risk of default. However, it is important to remember that this implies the need for your company to work with the bank to take out this type of credit. In addition, your employer will know if you are seeking credit.