Payday loans are an easy way to get money fast, but they can also be the quickest path to financial trouble. If you don’t pay back your payday loan, you could end up with thousands of dollars in debt that’s difficult to escape. How can you avoid getting a payday loan in the first place? Here’s what you need to know about payday loans I love and how to make sure you don’t get one.
According to the Consumer Financial Protection Bureau (CFPB), over half of all Americans have taken out at least one payday loan in their lifetime. That statistic is astounding when you think about it — almost everyone has used a credit card or even had a car title loan at some point. But payday loans I love are a completely different beast, and it’s important for people who take them to understand exactly what they’re getting into.
You might be surprised by how much this seemingly simple form of credit actually costs. In fact, according to the CFPB, a typical payday loan carries a 3% annual interest rate, which means you’ll likely owe more than $50 on a borrowed dollar if you don’t pay it back within the 14-day period. And as long as you don’t pay back your payday loan, you’ll continue to rack up interest charges every month until the principal balance is paid off. So if you borrow $200, you’ll end up owing $300 at the end of the loan term. Then you’ll start paying back the original $200 again… and then another $200… and so on until you’ve paid off the entire loan.
And that’s not even taking into account the fees that come with these loans. You may be charged extra for late payments, and depending on where you live, you may be required to pay an origination fee — meaning you’ll have to hand over a chunk of cash upfront before the lender will give you any money. The fees add up quickly, and that’s why most borrowers choose to use payday loans only once or twice a year — just enough times to cover any emergency expenses.
The good news is that there are ways to pay back your payday loan without having to take out another one. One option is to contact a payday loan company directly and see whether you qualify for a direct repayment plan. Most companies offer such a program for customers who meet certain criteria, and you’ll typically find the details on their website. Another option is to ask your employer for help. Some companies will allow you to repay your payday loan through payroll deductions, and depending on the amount owed and the size of your paycheck, you may be able to save yourself from taking out another payday loan. It’s worth asking your boss about this, especially since many employers offer other benefits like free health insurance and retirement savings plans.
If you do decide to get a payday loan, make sure you read the fine print carefully. Some lenders charge additional fees for making late payments, and others require you to pay for an “administrative fee” that’s often used to collect additional fees from borrowers who miss payments. Some states also limit how many times you can refinance a payday loan each year. For example, New York state limits borrowers to two refinancing attempts per calendar year.
Another thing to consider is whether you should take out multiple payday loans at once, especially if you already have high debts and little income. While using multiple loans at once is better than relying on a single loan, it’s still risky business. For instance, if you were to lose your job and have to pay off your entire loan, you’d be forced to pay the higher fees associated with multiple loans instead of just one.
Finally, remember that payday loans aren’t always bad. They’re convenient, fast and easy to apply for, and they’re usually cheaper than alternatives like a traditional bank loan. However, it’s important to treat payday loans like any other type of credit: You should never borrow more than you can afford to pay back, and you should never borrow more than you need. Otherwise, you risk falling deeper into debt.
In case you’re wondering, here’s what a payday loan looks like:
- A payday loan is made available to consumers who either don’t have access to other forms of credit or who don’t want to spend time applying for a regular loan.
- With a payday loan, you agree to repay the full amount of the loan plus interest on a set schedule, usually monthly.
- When you sign up for a payday loan, you fill out some paperwork listing your name, address and employment information. Afterward, the lender sends you a check that you deposit in your bank account.
- Once you make all of the necessary payments, you’ll have the remaining balance of the loan applied toward the principal.
It’s important to note that payday loans aren’t designed to provide long-term financing options. Instead, they’re meant to provide quick cash flow during short periods of time, like when you need to buy groceries or pay for your child’s school tuition. As a result, payday loans aren’t recommended for those looking for long-term solutions.
Payday loans aren’t the same as installment loans, which are offered by banks and other institutions and require borrowers to take out a new loan after repaying the first one. Installment loans typically carry lower rates of interest, but they can take longer to process and are generally harder to obtain.
The paydays are actually not for long-term investment and are used for a short duration of time like paying tuition fees of children of buy groceries, watching movies or any other sort of private quick cash flow. They are actually useful ones as it fullfil daily needs and are easily been get by online payments but they have some rules.