Ever heard the expression, “It’s not always the easiest option?” No credit checks and no collateral might make it easy to get a payday loan, but borrowing money might not be your best choice. Let’s look at some stuff you should know:
Second, what are payday loans?
They are usually short-term, high-interest cash loans under $1,000. The appeal is to fill the void if you need quick cash before your next payday. All they need is work proof and active bank account.
What’s the big deal? Payday loans are a workaround when you need money in a pinch. However, after reading the fine print, these loans may not be as consumer-friendly as they seem.
Payday loan risks
Payday loans are prohibited or restricted in over 40 states due to potential risks to consumers. Some threats to learn include:
Paying high interest and fees — The average annual percentage rate (APR) for a two-week payday loan is between 390 percent — 780 percent.3 Loans with shorter terms may be higher.4 Some lenders charge up to $15-$30 per $100 you borrow.
At such high borrowing rates, it might make it hard to meet daily monthly expenditures including house payments, insurance, groceries and more.
Deepening debt-When you can’t pay back the loan by its due date, the payments will rise and add to the amount you owe. A research on payday loans found that the average borrower is in debt for five months of the year, paying $520 in fees on average to regularly borrow $375.6
Certain ways to get the money you need
Payday loans aren’t the option. Several alternatives to consider:
Tap your Emergency Fund-That’s why you have an Emergency Fund. If you don’t have enough to cover expenses, consider merging these funds with another option.
Apply for personal loan-Personal loans will provide funds on the same day, regular instalments, and lower interest rates compared to payday loans. Search these links for more.
Using a credit card-It’s not easy to add debt to a credit card, but interest rates are usually lower, and you will have more than two weeks to pay off.
If you have a relationship with your creditor, call and order an extension. Through taking this path and describing the situation, you will have more time to pay off the debt.
Your choice is yours
If you need to borrow money, the simple, easy route can look attractive. But if you have choices and time to compare everything, be careful and choose what’s right for you.