Payday loans are never a good solution to before a financial crisis, during a financial crisis and after a financial crisis. In many cases, payday loans appear to be predatory and expensive.
Payday loans are short term loans which can easily be acquired even without collateral. Payday loans might seem helpful at the first glance but in reality, getting a payday loan could be the worst financial decision you could ever make.
More often than not, borrowers have to repay for the principal amount they have borrowed plus its corresponding loan fee which can be as high as the principal amount borrowed. Getting a payday loan is strongly discouraged because they come with very high interests, penalties and fees which can create disputes later on between the borrower and the creditor.
Payday loans can be obtained easily regardless of your credit rating. It provides immediate relief in the short run but it strips off borrowers with a hefty sum of money. There are lots of reasons on why you should avoid getting payday loans.
First, this type of loans comes with a very high interest that can easily drain your resources. The interest of annual payday loans can go as high as 300% and for every 1-2 weeks, the lender increases the charge. Furthermore, payday loans are definitely easy to renew thereby leading a borrower into the pitfalls of paying twice as much as his original loan.
In contrast with your belief, payday loans can be a great start of your financial crisis. For instance, you need money to finance an emergency. You get a payday loan with a promise to return the amount borrowed plus interest rate on your payday. During payday, the lender will take a huge chunk of your pay as promised.
It leaves you with a little amount to spend for you and your family’s needs. What happens next if you run out of money? You’ll definitely go to your payday loan friend’s place and obtain a payday loan again. This gets the ball rolling. In the long run, you might be surprised to see yourself trapped in a cycle of payday loans which is difficult to dig yourself out of.
Payday loans are great relievers when financial constraints arise. However, there are cases where borrowers are not able to repay the amount which they have borrowed. This initiates the lender to recommend for a second loan that may cover an interest rate ranging from 200%-300%. In some areas, interest rates can go as high as 500%.
For instance, you borrowed 1000 from a payday lender and you promise to repay 1250 in the next two weeks. Assuming that you have 1250 on hand after two weeks, try to imagine the things which you could have done and bought with the 250 you would be paying as the interest. Two hundred fifty pounds is definitely a lot of money which you could save as emergency fund or treat your family out for a sumptuous dinner.
If in case you cannot come up with 1250 in two week’s time, lenders would still be generous enough to allow late payments however you will be charged with another 250 for the delay. This can drive you to the pitfalls of a cycle of payday loans just to survive financially.
If you intend to understand the benefits and cons of taking payday loans, go to Revenue Connections now. Discover more information about payday loans and how it can be helpful or disadvantageous to you.