New lending platforms are appearing all the time, and it can often be difficult to know which to choose. Payday loans can be very tempting because they are quick and easy to obtain, but they have been criticised for their high charges and interest rates. For this reason, Lendico has put together a comparison of payday loans and P2P lending.
The financial landscape is developing fast and we’re seeing more and more different types of alternative lending platforms – “P2P platforms”, “P2B platforms” and ”Crowdfunding platforms” to name but a few. “Payday Loans” sites have recently attracted increasing scrutiny as they have been criticised for providing vague information about their short-term unsecured loans, for which there is often little attention paid to the borrower’s financial situation.
If you just need a little bit of money before payday arrives, a fast and easy payday loan seems like the ideal solution. However, like most things that seem too good to be true, it definitely is.
Let’s say that you wanted to borrow R 1000. If you knew you would end up having to pay over R 70 000 for it, would you take it? Obviously not. However, millions of people worldwide use these pay day loans to fund either overspending or emergencies, so much so that the payday industry is worth approximately 400 billion Rands globally.
Once you’ve signed up for one of these loans, you will be charged a fee for the loan, which you have to pay in one installment by payday. Although you receive the loan extremely quickly, if you miss this loan repayment date, you end up paying having to pay huge additional late fees, which spirals into more and more debt. This rollover debt risks borrowers having to take out more pay day loans to pay off the initial one.
The choice for online loans can be very confusing as it can be difficult to distinguish between the numerous offers. Lendico has put together a table to explain the differences between payday loans and P2P lending.
Of course the two both respond to different needs, but it’s important to realize that whenever it is possible, it is preferable to take out a long or middle term loan rather than an immediate cash payday loan. Even for emergencies there are often better alternatives, such as asking your employer for an advance, borrowing from a friend or family member or looking for emergency hardship programs.
Now you know all the differences between P2P Lending and Payday loans, you’ll know what to choose the next time you’re looking for a loan.
