When you get into those tight months and need extra money to make ends meet, where do you turn? Currently, 90% of people will likely turn to a payday loan. But is this the best move with the state of the economy? And if there is no other choice, what are the hazards to avoid in the process?
Hazard 1: poor financial planning
Most Payday loans are made on the understanding that even though you get the money now, you must pay it back with interest from your next paycheck, whether that paycheck is in a week or a month. Most people when applying for these loans tend to forget that this must be figured in. The interest needs to be paid back when your paycheck comes in, along with the amount you owe. When you are planning out what you need, remember you need to live the next month on the remainder so try not to borrow too much.
Hazard 2: the interest that is accumulated
The interest owed is often the next issue people tend to forget about. A lot of payday loans have a way of charging people exorbitant interest rates, some times as high as 2000% APR. This simplified means for the $100 you borrow, the first month you will owe say $30 extra for the first month. That’s not bad and is a simple case of only 30% interest. But let’s say for arguments sake you forget to pay for three months. Now aside from the calls about where’s our money and the check you likely left in good faith bouncing, the money you now owe has extra interest on it, bringing the total to $172.33 for three months of nonpayment. This doesn’t include the issues at your bank, which will increase the amount again; this is a giant increase in your initial loan. This is a good reason to pay it all as soon as possible since the cost of continued interest is dangerously expensive.
Hazard 3: the stores/websites themselves
In some instances, the stores themselves will not be reputable businesses. There is a growing trend of payday loan stores cropping up, then closing down shortly afterward. This can cause issues in repaying your loan, whereby you will still owe even if the business you got the loan from no longer exists. The best way to avoid this hazard is to look around and shop the available stores, first finding one that has long term and happy customers. There are still many reputable Payday Loans services out there.
Hazard 4: temptation to borrow too much
Don’t fall for the urge to take out extra money to pay for that special night out or for a spending spree. Payday loans, as we have seen, are far too expensive in the long run to use for funding this kind of frivolous spending. You will soon come to regret this kind of financing, when faced with paying those extra charges from your bank balance next month.
So remember, if you really NEED a pay day loan and no other option remains open to you, do your planning and research ahead of time; pay off your loan in a timely manner and above all don’t borrow more than you absolutely have to.