In general payday loans are quite an expensive way to borrow money. People who do take this route to borrow money pay an annual percentage rate or APR that amounts to an overwhelming percentage.
As an example, if you have borrowed $200 to be paid back in two weeks, you can pay a fee of $40 and if you do not repay the borrowed amount and the fees in that time, you may find it very disturbing that you will have to pay an ever-increasing interest rate. This kind of percentage can be quite alarming, especially for those who are only able to make repayments of a set amount that their budget will allow.
One of the main pitfalls of payday loans is that when you take one out it does not really solve your problems. They can make the problem even worse, this is because of the high-interest rate you will be charged. Regardless of what your problem is, the loan company will not really care as long as you make your repayments.
Because of the high-interest rate you are charged on what you have borrowed, instead of helping you it can very often pull you down.
Although, in an emergency or a time of crisis, payday loans can be very useful. You need to consider all the risks before applying for one. At certain times payday loans do make a lot of sense, especially if you are in desperate need of some quick cash. This would only apply to short term payday loans. There is a total difference with long term payday loans.
Problems will arise if the cheques you have written out to the loan company bounce. This will appear on your credit file and report. The result? You will find that very few banks are willing to deal with you.
There are plenty of alternatives to payday loans. These are a few:
- Having your own emergency cash or savings fund, but this one is often easier said than done.
- Open a credit card for emergency purposes, again this can be dangerous, as a lot of people will just end up using the card anyway.
- Get a part-time job (but this may take some time and will not be very helpful when a on the spot emergency arises)
- Consider a peer lending service for a better and more honest deal.
To sum up, payday loans are ideal in times of crisis or an emergency, but must only be looked at as a short term solution to get you out of trouble!
We can get emergency fund with payday loan. We can be benefited in our bad time by payday loan. But Payday loan can be debt trap for some one. If you have caught by payday loan debt you can seek help for your payday loan debt relief from the online financial company.