Economy
Understanding Payday Loans: What You Need to Know Before Borrowing
Payday loans have become a popular option for individuals in need of quick cash to cover unexpected expenses or make ends meet until their next paycheck. These short-term loans are typically marketed as easy, fast, and convenient, making them appealing to borrowers in financial emergencies. However, before taking out a payday loan, it’s crucial to understand how they work, their potential risks, and whether they are the right solution for your financial situation.
What Are Payday Loans?
A payday loan is a type of short-term borrowing typically meant to be repaid on the borrower’s next payday, hence the name. These loans are often for smaller amounts, usually ranging from £100 to £1,000, depending on the lender and your ability to repay. Payday loans are generally easier to qualify for than traditional bank loans, as they often don’t require a credit check or collateral. Instead, lenders assess the borrower’s income and employment status to determine eligibility.
How Do Payday Loans Work?
When you take out a payday loan, you agree to repay the amount borrowed plus interest and fees by a specific date, usually on your next payday. In many cases, the lender will require you to provide a post-dated cheque or authorize them to withdraw the repayment amount directly from your bank account on the agreed date.
The key selling point of payday loans is their accessibility. For people who have poor credit or don’t qualify for conventional loans, payday loans offer an alternative to get fast cash. Lenders often approve payday loans within hours, and funds are typically available the same day or the next.
The High Cost of Payday Loans
While payday loans can be helpful in a pinch, they come with significant costs. One of the most important things to know before borrowing is that payday loans tend to have extremely high interest rates. In the UK, for example, the interest rate for payday loans can be upwards of 1,500% APR. This means that even though you’re borrowing a small amount for a short period, the total repayment can quickly become unmanageable.
In addition to high interest rates, payday loans often come with extra fees for late payments or rolling over the loan into the next pay period. This can create a cycle of debt, where borrowers find themselves unable to pay off the loan and end up renewing it, leading to even more fees and interest.
When Are Payday Loans a Good Option?
Payday loans are designed for short-term financial emergencies, such as unexpected medical bills, car repairs, or essential household expenses. However, they should only be considered if you’re confident you can repay the loan in full on your next payday. If you’re unsure, or if you’re borrowing to cover ongoing expenses rather than a one-time emergency, a payday loan may not be the best option.
Alternatives to Payday Loans
Before opting for a payday loan, it’s worth considering alternative solutions that may be less costly and carry fewer risks. Some alternatives include:
Personal Loans – These typically have lower interest rates and more flexible repayment terms.
Credit Cards – Using a credit card might be a better option if you can pay off the balance quickly.
Borrowing from Friends or Family – This can be a more affordable and flexible option, though it requires open communication and clear repayment terms.
Conclusion
Payday loans can provide quick relief for financial emergencies, but they come with high costs and significant risks. Before borrowing, it’s essential to understand the terms of the loan, your ability to repay, and the potential long-term consequences. Exploring other financial solutions may help you avoid the debt trap that payday loans can sometimes create. If you decide to proceed with a payday loan, use it responsibly and only for short-term needs.
By Adedapo Adesanya
The Nigerian Exchange (NGX) Limited is seeking review of the controversial Capital Gains Tax increase, fearing it will chase away foreign investors from the country’s capital market.
Nigeria’s new tax regime, which takes effect from January 1, 2026, represents one of the most significant changes to Nigeria’s tax system in recent years.
Under the new rules, the flat 10 per cent Capital Gains Tax rate has been replaced by progressive income tax rates ranging from zero to 30 per cent, depending on an investor’s overall income or profit level while large corporate investors will see the top rate reduced to 25 per cent as part of a wider corporate tax reform.
The chief executive of NGX, Mr Jude Chiemeka, said in a Bloomberg interview in Kigali, Rwanda that there should be a “removal of the capital gains tax completely, or perhaps deferring it for five years.”
According to him, Nigeria, having a higher Capital Gains Tax, will make investors redirect asset allocation to frontier markets and “countries that have less tax.”
“From a capital flow perspective, we should be concerned because all these international portfolio managers that invest across frontier markets will certainly go to where the cost of investing is not so burdensome,” the CEO said, as per Bloomberg. “That is really the angle one will look at it from.”
Meanwhile, the policy has been defended by the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr Taiwo Oyedele, who noted that the new tax will make investing in the capital market more attractive by reducing risks, promoting fairness, and simplifying compliance.
He noted that the framework allows investors to deduct legitimate costs such as brokerage fees, regulatory charges, realised capital losses, margin interest, and foreign exchange losses directly tied to investments, thereby ensuring that they are not taxed when operating at a loss.
Mr Oyedele also said the reforms introduced a more inclusive approach to taxation by exempting several categories of investors and transactions.
By Adedapo Adesanya
Food Concepts Plc neutralized the gains recorded by three securities, returning the NASD Over-the-Counter (OTC) Securities Exchange into the negative territory with a 0.27 per cent loss on Thursday, December 4.
Yesterday, the share price of the parent company of Chicken Republic and PieXpress declined by 34 Kobo to sell at N3.15 per unit compared with the previous day’s N3.49 per unit.
This shrank the market capitalisation of the OTC bourse by N5.72 billion to N2.136 billion from N2.142 trillion and weakened the NASD Unlisted Security Index (NSI) by 9.57 points to 3,571.53 points from 3,581.10 points.
Business Post reports that Central Securities Clearing System (CSCS) Plc went down by 50 Kobo to N38.50 per share from N38.00 per share, FrieslandCampina Wamco Nigeria Plc gained 29 Kobo to sell at N55.79 per unit versus N55.50 per unit, and Geo-Fluids Plc added 5 Kobo to close at N4.60 per share compared with Wednesday’s closing price of N4.55 per share.
Trading data indicated that the volume of securities recorded at the session surged by 6,885.3 per cent to 4.3 million units from the 61,570 units posted a day earlier, the value of securities increased by 10,301.7 per cent to N947.2 million from N3.3 million, and the number of deals went up by 146.7 per cent to 37 deals from the 15 deals achieved in the previous trading session.
At the close of business, Infrastructure Credit Guarantee Company (InfraCredit) Plc was the most traded stock by value on a year-to-date basis with the sale of 5.8 billion units for N16.4 billion, trailed by Okitipupa Plc with 170.4 million units worth N8.0 billion, and Air Liquide Plc with 507.5 million units valued at N4.2 billion.
InfraCredit Plc also finished the session as the most traded stock by volume on a year-to-date basis with 5.8 billion units transacted for N16.4 billion, followed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.2 million, and Impresit Bakolori Plc with 536.9 million units traded for N524.9 million.
By Dipo Olowookere
The upward trend witnessed at the Nigerian Exchange (NGX) Limited in recent sessions continued on Thursday as it further improved by 0.10 per cent.
This was despite investor sentiment turning bearish after the local equity market ended with 23 price gainers and 28 price gainers, indicating a negative market breadth index.
UAC Nigeria gained 10.00 per cent to finish at N88.00, Morison Industries appreciated by 9.94 per cent to N3.54, Ecobank rose by 8.53 per cent to N36.90, and Coronation Insurance grew by 8.47 per cent to N2.56.
On the flip side, Ellah Lakes depreciated by 10.00 per cent to N13.14, Eunisell Nigeria also shed 10.00 per cent to finish at N72.90, Transcorp Hotels slipped by 9.95 per cent to N157.50, Omatek shrank by 9.23 per cent to N1.18, and Guinea Insurance dipped by 8.46 per cent to N1.19.
Yesterday, the All-Share Index (ASI) went up by 152.28 points to 145,476.15 points from 145,323.87 points and the market capitalisation chalked up N97 billion to finish at N92.726 trillion compared with the previous day’s N92.629 trillion.
Customs Street was bubbling with activities on Thursday, though the trading volume and value slightly went down, according to data.
A total of 1.9 billion stocks worth N19.2 billion exchanged hands in 23,369 deals during the session versus the N2.3 billion valued at N21.0 billion traded in 21,513 deals a day earlier.
This showed that the number of deals increased by 8.63 per cent, the volume of transactions depleted by 17.39 per cent, and the value of trades decreased by 8.57 per cent.
For another trading day, eTranzact led the activity chart with 1.6 billion units sold for N6.4 billion, Fidelity Bank traded 31.0 million units worth N589.3 million, GTCO exchanged 28.3 million units valued at N2.5 billion, Zenith Bank transacted 27.1 million units for N1.6 billion, and Ecobank traded 21.9 million units worth N744.3 million.
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