How can I get lower interest on payday loans?

Payday loans can quickly get you out of a mess as it can help to pay off an emergency bill, just as it can be a springboard to take advantage of a great opportunity for affordable purchases or to raise money for an incredible investment. Do you know within a few hours, some lenders can disburse cash to your account, with little or no queries, no collateral, no guarantor, and you can get that much-needed loan with ease?

Perhaps this is why payday loans are often referred to as instant loans or quick credit, as you do not necessarily need to have a bank account with the lender, nor are you required to keep your salary account or collection account with the bank offering to grant a payday loan. Whilst some lenders, especially traditional banks, may require you to maintain an account with a minimum of six-month history before accessing any type of loan, including a payday loan, many lenders do not have this stringent requirement.

Most lenders of payday loans, particularly FinTech, only require limited information such as an active bank account, with a biometric verification number (BVN) and a linked telephone number. Once you provide this data, your assessment can be done in a few hours.

However, as great as payday loans can be, the interest rate can be too high and sometimes it may seem ridiculous, ranging from 1.33% per month to 15.0% per month – that’s a whopping 180% per annum. Thus, why do some refer to payday loans as predatory lending and perhaps the last resort to meet emergency bills? Also, there is a need to check for hidden charges, as some lenders charge a management fee of about 0.5% and 1.0% of the loan amount, in addition to the lending rate. Likewise, some lenders, especially conventional banks charge insurance fees, which may also range between 0.5% and 1.0% of the loan value.

Be that as it may, this is not a Nigerian factor. It is the same everywhere and perhaps worse in some developed countries. You may be amazed to know that some payday lenders charge as much as 35% per month in the United States, where interest rates on credit cards and other types of loans are comparatively low at single digits.

Compare interest rates on payday loans from different lenders here.

 

Whilst payday loans do not typically require collateral, you may offer collateral to reduce the interest rate. However, payday loan providers only accept cash and cash equivalents, like treasury bills, bonds, mutual fund investments, stocks, and other liquid assets as collateral.

You may wonder, how can one pledge cash to get a loan? This is in fact possible, for instance, if you have foreign currency such as United State Dollars in your account but refrain from changing it to Naira to meet your emergency need because of the concern of possible devaluation, you can pledge the Dollars as collateral to obtain a payday loan at a reduced interest rate. Also, a friend or relative who is not unwilling to lend you funds may also pledge the funds as collateral to you. Similarly, if you have investments in financial securities like mutual funds, quoted stocks, treasury bills or bonds, you may also pledge them as collateral to reduce the interest rate applicable on your payday loan. For instance, if you invested in a bond that is yet to mature, you can use it as collateral. These collaterals, which are liquid assets, give comfort to the payday loan provider that you will pay back the loan or forfeit the collateral, which can easily be converted to cash.

As noted earlier, some payday loan providers do not require you to have a salary account with them to access loans, however, if you do have a salary account with the loan provider, it may strengthen your ability to negotiate a lower interest rate.

Similarly, staying with one payday loan provider gives you the ability to build credibility with the institution, a relationship that subsequently becomes your negotiation power to reduce the interest rate you are charged on payday loans. It is pertinent to say that conventional banks generally offer lower interest rates on payday loans, compared to FinTech’s and other loan providers, though the processing time may not be as quick, so if you do not mind some hours or days of delay, you may be able to save some money getting your payday loans from the conventional banks.

These are some of the few ways you can explore to reduce the interest on your payday loan. More importantly, always shop for the best rate, and do not forget that the terms are also important. The nairaCompare platform provides an option to ensure you the best decision that suits you. Take a plunge into our search engine and review a few options on payday loans. All the best in your search and make the biggest savings you can. You can agree that every Naira counts today, right?

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