The Disadvantages of Borrowing a Payday Loan
What constitutes an emergency varies from person to person. For some, it means paying the electricity bill, so the power isn’t shut off. For others, it means making an auto loan payment, so their car isn’t repossessed.
Another benefit of using payday loans is that payday lenders have more relaxed lending criteria. You can often get approved for a payday loan even if you have bad credit. You’ll have your money within 24 hours if you get approved.
Most people are aware of the main problem of using a payday loan – the high interest rates. Payday loans are typically a last resort for those with a bad credit score. Those people are considered a higher risk, which means that a high interest rate is the only way they can get approved.
Payday loans are infamous for having interest rates in the triple or quadruple digits. Interest rates are anywhere from 391% to 2,290%.
- Recurring Expenses – While payday loans are intended to be used for emergency expenses, and are advertised as such, the Pew Charitable Trusts reports that 7 in 10 borrowers use them to pay recurring expenses, such as utilities and rent.
- Inability to Make Monthly Payments – If you’re already having trouble meeting monthly expenses like rent and utilities, then borrowing a payday loan is only going to make that worse. The average borrow makes $30,000 per year, and 58% of them have trouble meeting monthly financial expenses.
- Money is Due Quickly – Payday loans have extremely short lending terms. These loans come due within a few weeks or one month. Online lenders have direct access to your checking account to ensure that they can collect the money before it goes towards anything else. Some of the lending networks listed above are fairer and allow you to repay a payday loan over months instead of weeks. These loans may also come with reduced interest rates.
- They are Unaffordable – Payday loans consume an average 38% of a borrower’s gross paycheck. Most people can only afford to pay 5% of their paycheck towards a loan while still meeting other basic living expenses.
- Loan Renewal – Roughly 80% of people who take out a payday loan take out another one within two weeks of paying them off. This creates a debt trap that is difficult to escape from. Remember, these loans are only for emergencies.
Find a Trusted Online Payday Loan Provider
Life comes with many expenses, but it’s often the unexpected ones that do the most damage. Emergency money borrowed from a payday lender can help you through hardships, so long as you can pay the money back on time and don’t use it for regular expenses.
The online lenders we’ve looked at today such as Money Mutual, Bad Credit Loans, etc. make for a great start in looking for a suitable payday loan with affordable terms and conditions. These loans are also easy to apply for and often have the money in your account within 24 hours.
One advantage of payday loans is that you can qualify for one even if you have bad credit. The downside is they have higher interest rates. It’s worth your time and money to pay the loan back on time to avoid paying even more.
With that said, if you ever need an emergency loan in a hurry, then payday loans are certainly a viable option worth considering.
According to the official website, Bad Credit Loans is committed to connecting to responsible lending partners and educating customers throughout the entire process. The site has advanced encryption technology running to protect your personal data. Rest assured that you, your money, and your information are all safe with Bad Credit Loans.
Which is the Best Online Payday Loan?
After taking out a loan, never skip an installment or default on one. Taking out another credit product to pay off the first one is a bad idea because it could lead to even deeper debt.
You shouldn’t feel like you can’t get a loan because you have a high debt ratio or a low credit score. You should still find someone willing to offer you a cash advance loan. Most loans require a steady income stream more than anything else. If you are making at least $800 – $1,000 per month, you’ll find someone willing to lend you money.
If you haven’t got much credit left on your card because of how many purchases you’ve made, you might want to pursue a secured loan. These are loans secured against collateral, making them easier to get. A title loan, for example, involves using your car or home as collateral. Keep in mind that the collateral is forfeit if you fail to repay the loan. The lender takes your possessions and sells them to make their money back.
Payday loans might not be the fairest financial products in the world, but they have some advantages that attract people to them. The main advantage is that you can get the money almost immediately when you need it. They are particularly helpful for emergencies.