You Should Avoid Payday Loans For These Six Reasons
The thumb rule of having a sound and stable financial condition is to become debt-free. However, emergency situations do not come with a warning – just like accidents, financial emergencies can happen at the most unexpected times. Hence, taking a loan seems to be the best option at that time. Payday loans have become quite popular of late because of how its convenience and the availability of numerous online money lenders. However, what most of these lenders do not tell you is the fact that payday loans are the worst kind of loans you can take.
Here are the six reasons why you should stay away from payday loans.
Unimaginably High Interest Rates
It is a known fact that credit card loans have severely high-interest rates that can drain your pockets in no time. But did you know that payday loans have even higher interest rates? If you are still wondering how high it can get, let us give you a hint – they can get as high as 911% for a one week loan and 212% for a one month loan. Well, if that has got your eyebrows up, brace yourself for there is more to come. Most people take payday loans so as to avoid short-term inconvenience. But think of the huge amount you are going to pay as interest!
Aggressive Debt Collection Practices
Because of their high interest rates, many people fail to repay the debt, an amount that is way more than what they had borrowed. While that sounds unjust, you can’t do anything now since you have already put yourself in a spot. No wonder payday lenders have a team of debt collectors who can make life quite unbearable for you. Calling you late at night, harassing your family or neighbors, or threatening you with the prosecution of wages are all unethical ways of debt collection and goes against the Fair Debt Collection Practices Act.
Too Easy To Get
Imagine getting a loan from your bank. You would need loads of paperwork and meet qualifications. But payday loans can be availed in just a few hours, and that alone should make you suspicious. It doesn’t give you much time to ponder because the more you think, the more you would not want to take it anymore. Obviously, the lenders know this well, and so they try to keep things as simple and straightforward as possible to lure you into taking their offer. Also, if you decide to back off after you sign the papers, you can’t. It almost seems like a trap.
Tons Of Hidden Fees
There are a number of hidden fees apart from the exorbitant interest rates in a payday loan. For example, some lenders might charge you $17 for every $100 you borrow. This can go up to $300 which should be paid apart from the capital and interest rates. Sometimes, a lender does not tell you about these fees, and you are clueless when you see this extra amount being deducted from your account.
A Vicious Cycle In the Long Run
Would you compromise your future for a small inconvenience in your present? You won’t, right? Payday loans might help you solve short-term pinches but they are terrible in the long run. It has been found that 76% of payday loans are taken to pay back old payday loans. The huge interest rate and fees make it a lot more than what you had expected. Though most loans are to be paid back in two weeks, a survey has shown that borrowers end up being in debt for close to six months.
Access to Your Bank Account
Payday loan lenders insist that you do an electronic transfer or deposit a checkwhich means they have access to your bank account. They also prefer to take the money out of your account directly once you get your salary which means if you are running low on cash and need to have some amount for your daily needs, you won’t be able to stop your lender from getting their due. If this practice persists as the amount gets higher, you might also get overdraft fees from the bank.
Payday loans are the worst kind of loans right now, and no wonder about 18 states in the USA have banned it from being practiced. Instead of taking loans, try all kinds of personal saving tips and start right now!
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