Why You Should Try To Avoid Payday Loans
Payday loans can seem like the perfect solution to short term cash flow problems, but they are exactly the opposite. Behind the gimmicky advertising that promises quick cash, no credit checks, and reasonable payments is a system that traps consumers in a never ending cycle of debt. Payday loans had incredibly high interest rates. They require you to give up very personal information including your checking account and the contact information of friends and family members, and they are difficult for many consumers to understand.
Payday loans operate on a short term loan process. A $200 loan can show to only have a 15% interest rate, but that only takes into account the few days between the loan being granted and the pay date when the loan is due. If for any reason, the loan is not able to be payed on that date, there is another 15 % interest charge for an extension to the following pay period. The annual percentage rate or APR that many consumers are used to seeing for a payday loan can be 390% or higher!
When you apply for payday loans you are giving the lender a large amount of personal information. You are required to tell them where you work, when you get paid and give them your checking account number. This may not seem like a big deal since you are going to have the funds deposited into the bank, but what is important to note is that they will automatically take your payments from your bank account on your payday. A few miscalculations or errors and your entire paycheck is gone before you ever had access to it. Should your payment not clear the bank, they will call every number listed on your application. This means your employers, friends, family members and of course yourself. Many have reported these calls to be threatening.
Payday loans are based in large part on customer confusion. Not only are they not showing the full annual percentage rate that consumers are used to judging loans by, they sneak in the fact that payments will automatically be deducted. They may claim to have payment plans available should you not be able to make your payment as agreed, but these are often in the fine print and very complicated to adhere to. For example one lender requires consumers to call 3 business days in advance to the payment due date in order to qualify for payment arrangements.
Trying your hardest to avoid payday loans is always the best option. Before accepting that easy money so quickly stop to think about what you are truly paying for the ability to have access to a portion of your pay a few days early. There are a wide variety of other options for consumers needing cash quickly, research them and see if you cannot find one that is much more beneficial to you in the long run than a payday loan. Payday loans are costly and burdensome if left unpaid.