Whilst in times of dire need a payday loan may look like a dangling golden rope designed to pull us out of the depths of hell. It actually in most cases is a noose. Payday loans, whilst they can help you in the short term, in the long term they can leave you in a lot of debt that you might never be able to pay off.
What is a payday loan?
We will start with the basics, what is a payday loan? A payday loan is a loan designed for a very short term use. The idea is that if you are short on cash, then you take out a payday loan, sign sign some papers and the money gets taken out of your account automatically on payday. The downside to this type of loan is that you are not only paying back the original amount that you borrowed but also interest on top of it. Here we are not talking normal interest rates, we are talking about interest rates of up to 400%.
The problems with payday loans
The problems with payday loans is that people normally take them out in dire need, and the people that normally take them out are people that are living paycheck to paycheck. This means that if an emergency was to come up, like replacing the boiler or fixing the car. Then they would have no option but to take out a payday loan. However, it is not very likely that someone who one month, doesn’t have the extra money to pay for something, would have it the next month. This makes it almost inevitable that they would have to take out another payday loan to help them pay back the first one. This creates a vicious cycle for the borrower in which they can easily fall into debt. See more!
Why are payday loans so tempting?
So you may be asking yourself now: why do people take out payday loans even though they are so bad? The simple answer is because in most cases the lenders say “yes” where others have said “no”, and that the money is in your account within minutes. This is especially the case with payday loans online. It is a very enticing prospect to have the money that you need in your account in under an hour. People who have constantly been told “no” by credit lenders may believe that they have finally been accepted and that it is a safe way to borrow money. Some people don’t understand the concept of payday loans and the high interest fees and that come with them and accept the terms and conditions without fully understanding them.
To round it all up, in every case where it isn’t vital to take out a payday loan, they should be avoided. Whilst at the time, they can seem like the quickest and easiest option you will regret that when a few months later you may be regretting that when you are struggling to pay off the payday loan that is covering you an extortionate rate of interest. Click here for more information: https://www.investopedia.com/terms/p/payday-loans.asp