Payday loans seem to be a much easier alternative when you are struggling to overcome a financial emergency and you don't have the required fund. You can take out a payday loan without any credit check and the amount usually gets deposited in your bank account within a day. However, there are certain reasons for which a payday loan may not be a feasible option. Check out this article to know why you should try out other sources of taking out a loan instead of obtaining a payday loan online.
- You may have to pay hidden fees - It is highly likely that you have to pay a fee to take out a payday loan. Usually, the lender adds a charge up for every $100 you borrow. So, you need to pay this fee over and above the interest rate. Therefore, like any other loans, you should carefully go through the documents while obtaining a payday loan.
- Interest rates are really high - The interest rates on payday loans are incomparable. You cannot imagine how much interest rate a lender can charge on a one-month or one-week payday loan. It may be up to 200% of the capital amount. So, if you have thought that credit card interest rates are high, then it is time to change your opinion. And, if you are not able to repay the loan within the said time period, calculate how much you have to pay on the interest.
- You may get trapped in the payday loan loop - Many persons get trapped into the payday loan loop and it becomes difficult for them to come out of it. What happens is, you take out a payday loan and when you cannot repay it back, you obtain another one to pay back the previous one. This situation continues and after a certain time, it becomes difficult to come out of the loop.
- Payday loan lenders may threaten consumers - Aggressive collection practices have always been associated with payday loans. The payday loan companies often employ aggressive practices by threatening consumers to garnish wages if they're not able to pay back the loan amount. However, if you experience such a situation, you can always file a complaint with the Federal Trade Commission or FTC.
- Payday loans are illegal in some states - There are some states in which payday loan is illegal. There is strict legislation to ban payday loans. However, some lenders hide this information and pretend to be from some other state in order to offer high-interest payday loans. So, gather knowledge whether or not payday loan is legal in your state before you take out one.
Therefore, the next time you experience a financial emergency and consider taking out a payday loan, wait for a moment and consider the financial implications of doing so. You can try taking out a loan from a credit union or a bank, or borrow the amount from one of your friends or family members. However, if you're borrowing from friends, make sure you sign a contract and repay the amount within the stipulated time period in order to avoid misunderstandings in your personal life.