It sounds simple enough-cash until your next payday. Don’t be fooled like so many millions of people already have. Payday loans may seem like a dream come true in your time of need, but they are really just the beginning of your financial troubles.
Payday loans offer cash for any reason, regardless of your credit history. There are very few requirements needed in order to obtain a loan. All you need is a job and active bank account. You write the payday loan company a check for the amount that you borrow, and they hold the check until your next payday. A small fee is required for holding your check which must also be paid at the time of the check.
There is the first problem with a payday loans. Interest rates for allowing you to borrow the money is ridiculous. Interest rates sometimes range well over 200%. This amount is a huge chunk added on for allowing you to borrow money for such as short time frame. Along with the interest rate, borrowing more than you can repay is also a huge problem. A payday loan can only set you back further into debt. The money you will use to repay the loan was probably designated for another bill or function, leaving you wondering how to cover this debt now.
Payday loan companies are in the business to make money. They are counting on your inability to repay the money and extending your loan. Extending your loan means paying the interest until the total amount can be repaid. At 200% interest, just one month can equal $100 or more. The longer you extend it, the less likely you are to be able to repay the money. These fees add up to a pretty penny pretty quickly.
If you are unable to pay the interest on the loan or the loan itself, you may end up in court. Payday loan comapnies can sue you to repay the debt if you are unable to do so. In addition to the loan fees, this will also leave you to pay courst costs and attorney fees as well.
It is never a good idea to take out a payday loan. If there is an emergency situation that arises, try to borrow the money from a family member or friend. If a payday loan is your only option, be careful and read all of the paperwork before you do it. Never take out more than you can repay.