A payday loan might seem like a great thing, you can receive the money you have earned early if you are in a bind for some quick cash. However, going down this path might not be the best idea.
Payday loans provide fast cash, and you can be approved very quickly. This means that there is usually no credit check. Since these loans are super easy to renew and to get, it may feel like there is nothing wrong with a little advance.
The truth is that these loans are not a good idea. You can get caught in a cycle, the interest rates are super high, and state regulations can affect your loan and how it is dealt with. Other reasons exist that make getting one of these detrimental, such as it has a negative impact on your credit score.
If you need additional loans on top of your original, the lender will charge an additional fee each time. This cycle occurs when many people that cannot clear the original loan have to keep increasing their payday loan each month. These charges will accumulate, and lenders will take advantage of your accumulating debt.
Accepting money that does not require a credit check is nice, but your interest rates will not be. The average annual percentage rate on one payday loan can range from 200 percent to 500 percent. How obnoxious is that? You will ultimately be paying back way more than you initially borrowed.
Since people who use payday loans borrow on average eight loans per year, the typical borrower will be paying more than $520 to pay back a $375 loan. In the long run, these loans are not beneficial and will get you stuck in the debt cycle.
There are already some laws in place that are meant to curb the abuse of payday loans. However, you should always be wary of lenders, especially ones that cannot be sued in court. These lenders will take advantage of the laws not applying to them, and will be able to get away with very high-cost loans that do not comply with state consumer laws.
There are many better options for a loan than trying for a payday one. Whether it is a loan from family, friends or credit counselling program, these options are almost always going to be more beneficial in the long run. Here are a few more options that you may consider pursuing:
•Check out overdraft protection for your bank account, but be cautious.
•Local community-based organizations may give out small business loans
•An advance on pay from your employer, not a lender
•A small loan from a small investment company or your credit union
•Get a cash advance on your credit card.
•Ask your creditors for more time or work out some plan that works for both of you.
While these are just a few options, there are many more out there if you are in a serious bind. Just make sure to gather all of the information that you can before taking any measure to get out of debt.