Payday Loans: Watch out for these dangerous loans

During these turbulent economic times, faced by millions of working Americans, payday loans are becoming a popular source of short-term financing.

This is especially true for low-income families. Payday loans are easy to obtain and do not require any kind of credit check, but are they really a good idea?

A payday loan is a small cash loan


A payday loan is a small cash loan given to an individual based on the fact that the loan is expected to be repaid with the next payday.

It’s basically about getting part of your next paycheck early. The repayment period is based on how often you pay. The borrower is expected to show proof of employment and bank statement.

The loan applicant writes a follow-up check on the loan amount plus fees. Some states require that the check date be the day the beneficiary receives the money.

Under these circumstances, the borrower signs a contract in which the lender will check by the agreed repayment date. This contract becomes necessary because many states no longer allow a person to write a date-check.

On the day the loan arrives, the borrower enters the lending store to pay off the loan. If the person is unable to come to the store, the credit company can send the check directly to their bank. If the borrower discovers that they cannot repay the loan at that time, the loan may be extended, which may include additional fees.

Failure to complete these loans may cause the lender to threaten prosecution or check fraud.

Lack of easy money


These loans usually have a high price. Financing costs are 15 to 30 percent of the amount borrowed. Because in just a few weeks it is 15 to 30 percent if compared to getting a loan at an annual percentage rate of nearly 800 percent.

Because day-to-day loans are so much easier and lack traditional credit checks, companies often plummet in minority neighborhoods, knowing they are more likely to get one of those loans.

Most of these people, on the other hand, already have financial difficulties, and borrowing money at such a high-interest rate only makes things worse. In addition, many of these people cannot repay the loan when it comes.

This situation leads to additional bank charges for rejected checks and credit costs or has to extend the loan, which will cause even more fees. Many of these people get stuck in a vicious cycle. They repay the loan the next day but discover that they do not have the necessary funds to cover their expenses.

They then go back for another loan. This cycle can be continued indefinitely as there is no limit to how many times a person can get this type of loan.

Alternatives to loan loans


There are many alternatives to getting a payday loan. The best thing you can do to avoid these types of loans is to create a budget so that you can afford to pay the bills. Exclude as many unnecessary purchases as possible. Put that money in a savings account.

Even the loose change that is around the house can be invested in savings. Set a budget for groceries, mobile phones, and fuel economy. This can only be achieved by purchasing the items needed when working at a grocery store. See cell plans that offer a base rate for commonly called numbers. When running directions, try to do as many of them in one trip as possible, to conserve fuel instead of making several trips.

Another alternative to a payday loan 

Another alternative to a payday loan 

Another alternative to a payday loan in case of unexpected expenses is to get a prepaid payment from your employer. Many employers offer this to their employees in emergency situations. Employers want good workers to be satisfied. While this will not always work and you will not be able to get used to it, if you face a true emergency and bring it up with your employer, there is a good chance that you will get some sort of financial assistance.

You can also think of a pedestrian. Most people have something that can be pledged, such as old jewelry, tools, and electronics that can be used as collateral for short-term pawnbrokers.

You get money for your item and you can still go back and repay the loan and get your item back. If you cannot repay the loan, the pioneer keeps the item you gave them. So you end up basically selling your stuff to them. This is often a better alternative than getting an unsecured payday loan and being hit with high costs and you are in a dangerous spiral debt.

While not ideal, credit card advancement can also be an alternative to a payday loan. Although interest rates can be applied with a credit card advance, it can be very useful for a one-time emergency.

Ideally, you would have an emergency fund that should cover the financial crisis, but the credit card will work in a stick and instead of paying 700 percent APR on a payday loan, you are left with only 25 percent APR on a credit card. Not great, but it’s still better than payroll reimbursements.

Lastly, finding a friend or family for a loan to help you get through a difficult time is another option. Most people have relatives or friends who will lend them the money they need to help with unforeseen expenses or emergencies.

No interest is usually added to these loans, and sometimes arrangements can be made in installments over time. Of course, maybe one day it can ask you for a favor, and money can ruin relationships, so this should be another last resort.

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