Many people are aware that payday loans are a bad idea, but they continue to use them anyway. Why? Fast cash. Where else can you get a few hundred dollars in just a few hours – with no credit check? Payday loans may seem like a great way to pay for unexpected expenses or buy groceries until payday comes along. However, those who use them typically end up in a vicious cycle that’s hard to get out of – landing them in even more and more debt each week.
How Do They Work?
Payday loans work by consumers giving the lenders a post-dated check for the amount that they wish to borrow, plus a fee – a very high one. Interest rates for a payday loan average from 200-500 percent – much higher than a credit card, which may top out at 36 percent or so. For a $250 loan, it’s not uncommon for a person to have to pay a $50 fee the first time. Then, if the consumer still can’t pay the loan back the following week, he or she can opt to roll it over for another two weeks and then another $50 fee is assessed.
Why Payday Loans Are Risky
It is very rare that a person uses a payday loan as a one-time event. The average person that uses these loans uses them nine times per year. They become an addictive way to get easy cash, especially for those with poor or no credit history. They keep having to pay fees and end up with so much debt. In fact, more than three-quarters of payday loans are to pay off older loans. Although most payday loans must be repaid within two weeks, it is not uncommon for a person to still be paying off the debt six months later or longer.
Not only that, but payday lenders are able to obtain access to your bank account. They withdraw the money automatically when it is due. If there are insufficient funds, the lender and the bank both assess fees. So by the time that $250 loan is paid off, it may end up costing you $1,000 or more.
Use Loans Responsibly
Payday loans have put many people in bankruptcy. Don’t be the next casualty. Let us help you with your debt. We offer options such as debt consolidation so you can avoid bankruptcy. Call us today to learn more 1-888-329-5198.