Secured versus unsecured loans and the APR issue

Secured loans attract the consumer because of their installment schemes, and offer the advantage to make repayments for a longer time period. When you consider taking a loan, the low interest rates of a secured loan are more attractive in comparison to the high interest rates of payday loans. The simple fact that these are for short term that fulfill needs immediately is not considered, which is something that can never be expected of a secured loan. Painstaking efforts are involved in getting a secured loan, while payday loans are just a few clicks away. High interest rates on these loans can be compared with the collateral that you have to provide to get a secured loan. Even then the interest rates on cash loans in terms of annual percentage rates (APR) can be justified owing to the high risk factor involved. The fact is that APR is calculated on an annual basis, and this does not apply to short term loans. Mentioning the APR applicable is just a legal formality that the payday lenders follow, it is one of the features that show you whether the lender is responsible, and genuine.

Responsible Borrowing

Due to the ease of availability of these loans, it can be very easy to get carried away, and use such loans repeatedly. As a consumer, it is important to realize that managing personal finances is ultimately a personal responsibility. Just because there are such efficient and easy financial services available does not mean that you take them up even when you do not have the need. Bank overdrafts, credit card cash advances and payday loans are all meant to cover only temporary financial needs. They should not be considered as a long term financial option.

Responsible Lending

Short term loans are meant to fulfill only temporary financial needs, and every genuine lender who follows a responsible lending policy, will make that very clear to the customer, in every way possible. Genuine lenders will have a registered license number, which can be verified. They will be transparent and upfront about all their charges, and there will be no hidden costs involved. Genuine lenders will make sure that you do not get overburdened, and thus will not offer you a loan if you are already in a debt, if you have already taken an overdraft, or if they find that you will not be able to repay the loan amount. Genuine lenders are also connected to credit verification agencies, and if you repay your loan successfully, they inform these agencies of your profile status, mentioning that you are not a high risk borrower any more. This helps build your credit profile, and in time you will be eligible for more cash, from other credit sources.