Why are Payday Loans Considered as a Really Bad Idea?


No matter how we look at it, getting a payday loan is never a good idea before a credit crisis, during a credit crisis or after a credit crisis. Payday loans are never a good answer to a financial crisis as it is expensive and often predatory.

Basically, payday loans are short term-debt that can be obtained easily without the need for collateral. They may seem helpful at first, but in the long run, you might realize that it could be the worst decision you have ever made.

In many cases, borrowers have to repay for the amount they have borrowed plus the loan fee which could be as high as the amount they have borrowed. More often than not, payday loans offer unreasonable and relatively high interest rates, fees and penalties which lead borrowers to file for a complaint with government agencies against money lenders.

Payday loans are easy to acquire regardless of your credit rating. They may seem beneficial at first but there are a number of good reasons why you should stay away from taking payday loans. For the convenience it provides in the short term, borrowers have to pay for a hefty sum of money.

Why It’s A Bad Idea

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.

Getting a payday loan could be the start of your financial crisis. For instance, an emergency came up which leads you to acquire for a payday loan. You promise the lender to pay for the amount you borrowed on your payday. When salary day comes, a great chunk of your pay will be taken by your payday lender.

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.

Undeniably, payday loans provide immediate relief to borrowers who are facing a financial crisis at the present. However, when loans are not paid off on time, lenders may suggest for a second loan with an interest of 200%-300%. In some cases, interest rates may be over 500%.

It can be very hard to get out of payday loan debt.

Take this case. You borrowed 1000 and promise to pay off 1250 after two weeks on your payday. Imagine the things which you could have done if you have an extra 250. You family will definitely be happy to be treated in a sumptuous dinner or you could have saved a huge sum of money for emergency purposes.

If you do not have 1250 cash on hand, what will you do? What will lenders do? Lenders can be generous enough to you to extend your loan but on one condition. You will be charged with another 250 for the next two weeks. This simply means that if you cannot repay the loan on time, you will find yourself trapped in a cycle of payday loan in order to survive financially.

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Learn More About How To Get Out Of Payday Loans


payday loan trouble

Payday loans offer fast cash solutions and for this reason they have become very popular. They take very short time to be approved and also require very few documents to qualify and hence a huge number of people find that they have the full access to the loans enjoying the cash that they need at any given time of the day.

The lenders have made an online presence thus easily reaching out to the borrowers even during hours that would not have been possible to access the loans in case of a banking institution process.

With such an easy way of getting money, it becomes easy for people to be addicted to the loans and applying for them even when they do not really need them something which can lead to debts which can be quite costly. As an individual, simple considerations can help you in keeping such debts with payday loans at bay giving you the financial freedom that you really deserve.

Apply for the loans only when you really have an emergency to take care of. One of the things that can easily lead you to the debts is applying for the payday loans when you do not necessarily need the money. It is best that you apply for the loan when you are faced with a financial circumstance that cannot wait till your next pay check. For instance, a medical emergency can be a good reason to get the loan as compared to purchase of a nice new appliance since the latter can wait till you have your money.

Try and get the best interest rates in the market. The interest rates, even though higher with payday loans, can vary from a lender to another. A simple way of ensuring that you do not end up failing to repay is by choosing interests rates that you can work with comfortably.

This will ensure that your income will cover the amount and the interest within the repayment plan that you are in hence avoiding situations where penalties are imposed for failure to repay the loan. The options are numerous and you won’t miss an arrangement that you love the most.

Consider applying only for the amount that you need. Payday loans work with the income figures to give an amount of money that matches and an amount that offers the lenders some sort of security with the money they are lending out. When applying, you can avoid situations where you incur debts by going for an amount that is lower than what you actually qualify for with your income. The amount will ensure that you take care of what is most important and at the same time help you manage to repay on time saving you from debts that could otherwise arise.

Consider other repayment options. In as much as you will be relying on your income to repay the loan, it is important to remember that anything can happen when you have already accessed the loan. You will therefore be better off if you have another possible means of repaying the payday loan in case your income fails you.

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