There are always valid reasons to take payday loans. The most common reason why many Americans resort to payday loans is emergencies. Many people don’t plan for emergencies. And even if you do set some funds aside for use in case of an emergency, it’s often not enough because you can never estimate the monetary needs of an emergency with precision. Though convenient, payday loans are not the best options for sorting out your financial needs. They may seem enticing, but that’s just because they are structured to lure you into a trap; an unending cycle of debts which will mess up your financial foundation and leave you sinking in those debts.
How payday loans work
The concept of these loans is simple and pretty much straight to the point: you take a loan which comes with a high interest with the hope of paying it back plus the interest when you receive your next paycheck. If you don’t mind paying back the high interest rate, well and good. However, these loans are structured to give you an option of forfeiting to pay the loan when you receive your paycheck. When you forfeit the loan, besides the loan itself and the interest, you will have to pay some fee so that you are allowed the option to carry the loan forward to the next payday.
For instance, say you take a $200 payday loan with a 20% interest. It means that on your next payday you are supposed to pay back $240. If for some reason you choose to carry the debt forward to another payday, you may be charged a $20 fee on late repayment. So far, out of the $200 you borrowed, your payday loan lender has made a whopping $60 from you. That’s 30% of the loan you took. It doesn’t seem much of a big deal until you find yourself with three of four such loans. You see it? So, in the long run, payday loans are not good for you. In fact, it’s a quick way to get into a financial difficulty. On this post are some reasons why you should stop using payday loans to get by. Read on.
Payday loans come with very high interest rates and costly fees
Your payday lender wants to make the most out his or her dealings with you. Most payday loan lenders charge between 15% to 30% interest rates on their loans. If for any reason you take a year to pay the loan back, you will part with at least 390% of the loan in interest. That’s how fast payday loan interest build up. Besides that, whenever you push the loan forward, you are charged a renewal fee. If you get two paydays a month, and you take a year to pay the loan off, you will be charged 24 counts of renewal fees.
Payday loans get you trapped in a debt cycle
Generally, payday loans are supposed to be paid off in a couple of weeks. However, people don’t always pay off loans with the same zeal they take them. It’s only human than you’d want to take your time to pay it off; paying off loans is hardly ever a priority. If reports are to go by, an average American will start making efforts to pay off their loan debts when the interest have built up to alarming amounts. The common tendency to roll debts over every payday only keeps people in a seemingly unending cycle of debts. The longer you stay in this cycle the more the interest and roll over fees on your payday loan build up. By the time you realize it, the loan may be too big to pay off using your paycheck. It’s worse if you use payday loans to get by.
Payday loans are just too easy
While it takes time to sanction personal loans and credit card loans, the payday loans come quite too easy. They are sanctioned within a few hours. As the adage goes, “If the deal is too good, think twice.” In this case, you may need to think more than twice. What’s more? You can’t back out of a payday loan. If you convince yourself to cancel your loan request shortly after signing the request forms, it’s too late; there’s no looking back. This ease is not good for you because it doesn’t give you time to think about other cheaper solutions to your financial needs. Now that you know how bad payday loans can be for you, they shouldn’t be your first option when an urgent financial need arises.
Payday lenders require access to your bank account
It’s too bad if you don’t take time to go through the terms and conditions page when you apply for payday loans because the terms may empower your lender to a direct access to your bank account. Yes, the agreement may allow the lender to take money directly from your bank account without your permission. Often, this takes effect when the loan balance has grown to a figure so big and you stop writing your lender paychecks, they will take all the money from your bank account and you will get frequent overdrafts from your bank. That’s how bad it may get for you if you keep using payday loans to get by.
Breaking and ending the cycle of payday loans will take you a lot of effort
It’s like the case with most addictions. At first it’s all exciting and pleasurable, then it gets boring and with time the pain gets more than the pleasure. By then you’ll have suffered the side effects but it still takes a lot of effort to break the cycle. There isn’t a quick fix to this financial situation. You just have to pay your debts off. If you want to put an end to the cycle of payday borrowing, you have to take a hard look on yourself; ask yourself how you got yourself into the cycle and work out a plan on how to put an end to the cycle. At this juncture, payday loan relief methods like payday loan consolidation become a holy grail to help you out of payday loans fast. These loan relief initiatives are like rehabs where alcoholics sign up for to end a life-threatening addiction. The damage will have been done but they can help you devise a financial plan to help you out of payday loan debts.
For more information on payday loans and payday loan consolidation, get in touch with us today.