No wonder that many people view this product with considerable suspicion. After all, they have learned that there is nothing free in the world of finance. Therefore, they quite suspiciously try to determine how exactly a non-bank institution will make money if it gives away free loans with zero interest.
A free loan and the payday lender’s profits
Customers who use the services of a payday lender for the first time really have the opportunity to take out a free loan. In other words, they repay exactly the amount they borrowed. Unfortunately, regular customers of a particular non-bank institution cannot say the same about such a service. If a customer borrows 1,000 zlotys and repays 1,000 zlotys after 30 days, how does the payday lender make money? The answer is actually very simple. If the customer is satisfied with the service, there is a very high probability that, when they need money in the future, they will use this option again. However, the second time they will be charged genuine interest.New customers taking advantage of a free loan with just an ID must not, under any circumstances, be late repaying the payday loan if they still want it to remain free. Otherwise, they will be charged penalty interest as well as the costs of collecting payment reminders.
Free payday loans and living on credit
The wide range offered by payday lenders gives customers considerable freedom when deciding which payday loan to choose. To begin with, we can easily find the best cash-loan terms on financial comparison websites. Competition in this industry is indeed so strong that customers can find at least several, or even a dozen or so, companies offering free loans. In this way, they can make free use of payday loans, even attempting to repay previous debt with a new loan. This gives the customer a specific amount of money in circulation. When the loan repayment date approaches, the customer goes to another payday lender to take out a new loan, for which, of course, they will not have to repay any additional interest. The method seems clever and very simple. However, it should also be borne in mind that some payday lenders impose limits on the maximum amount that can be borrowed without a commission. It can then be somewhat disappointing if we borrow as much as 1,500 zlotys without interest from one company, while from a competitor we receive an identical payday loan of only 500 zlotys.
Borrowing and the risks
Online loans can really be obtained very easily. Namely, there is no need to provide any income certificates, payday lenders do not examine our history with BIK, and the money is generally transferred on the same day after the application is approved. The greatest danger is customers’ excessive recklessness when deciding to take out subsequent loans. There is even a slight possibility that someone who likes the rapid inflow of money, as well as the adrenaline associated with an approaching repayment deadline, may become addicted to payday loans. These are rather extreme cases, but it is nevertheless important to be cautious so as not to fall into a debt spiral from which it will later be difficult to escape.