Nowadays, payday loans have become popular sources of instant money. However, many people don’t understand that a payday loan can’t solve all their problems. It is just a temporary solution to their financial problems. If you don’t have a regular and steady source of income, you should not go for a payday loan since you will have problems repaying it on time.
Given below are the top 10 reasons why you should not go for a payday loan:
These loans come with exorbitantly high interest rates. On certain occasions, the interest rate can go up as high as 300%. A payment default will shoot up the interest rate beyond your imagination.
Your credit score will take a hit in the event of non-payment of the loan. This will prevent you from being qualified for credit in the future.
Most of the time, you have to borrow more than one payday loan to meet emergency expenses. As a result, the cost of repaying these loans becomes quite high and burdensome.
Most of the time, it is seen that borrowers go for payday loans for trivial purposes. They don’t differentiate between their needs and wants.
If you use payday loans to make yourself debt free, default in payday loan payments can make situation even worse. It will have a snowballing effect due to its extremely high interest rates.
If you explore properly, there are more viable options than payday loans like personal cash loans and cash advances. So, you don’t essentially need to go for a payday loan all the time.
Payday lenders will often charge hidden costs from you. As a result, the cost of repayment of your loan gets higher.
If you are suffering from a huge amount of debt and you take out a payday loan to finance your vacation expenses, then you are asking for a bigger trouble.
There are no fixed rates of interest for payday loans. Lenders impose the rate according to their convenience and also keeping in mind their yield. They often make the most of the financial hardship of the customers.
Payday loans are a hindrance to good budgeting and savings. Renewing your payday loans and extending its repayment period again and again hampers your budget.
So, even though payday loans never ask for a credit check, you should check whether you really need them after taking into consideration the above mentioned points.
Jane Fonda is a well-known blogger. She writes for easyfinance.com. She offers interesting tips on college financing, personal loans, retirement savings and investments, and budgeting as well.