A payday loan is perfect to get cash to quickly deal with problems such as a car breakdown. You have to then write a post dated cheque with the amount and also the finance fees which are to be paid to the payday lender. All this information has to be entered online just in case you apply for payday loan via internet. After all this, you are given a period, usually of 14 days to back the lender. When that period is over, you have to pay the lender let them deposit the post-dated check, or write another post-dated check for the amount plus an additional finance fee. If you do not pay the debt in full at the end of the term, you will be charged additional fees and finance charges.
We will now take a look at how payday lenders work, and understand why it’s in your best interest to avoid payday lenders.
High Interest Rates
You are under the impression that only credit cards have high interest rates. The truth about payday loans is that they are higher than the credit card interests. They can be as high as 911% for a week loan and it can be 212% for a monthly loan. Always remember that when you sign for a payday loan, lenders will request that you should perform the transactions using electronic transfer. That means that you need to access your bank account.
If you are unaware about how payday lenders work, then you need to know some of the other things about payday loans. Similar to the hidden bank fees, there are even hidden fees with the payday loans. The payday loans and the fees are on top of the loan capital and the interest rates. So, before you borrow money, you should take care that you properly understand the financial obligation.
You might feel that payday loans are helpful at times, but the truth about payday loans is that it is not wise to get a payday loan in the long run. The interest rates are too high, they have hidden fees and all this sums up to the fact that payday loans are not the best option. In fact, payday loans are actually weakening your financial scores.
The harsh truth about payday loans is that you are likely to end up paying multiple times the amount that you originally borrowed. The debts that get created because of the payday loans are likely to quadruple in just a single year. That makes it hazardous and hence one small mistake can cause you a life long debt.
With all this information on how payday lenders work, it would be wise to refrain yourself from a payday loan. Payday loans may look like an easy answer to your financial troubles, but if you do take one, you’ll get into a ton of debt that’s just not worth the trouble. At 4 Pillars, we help people manage their debts and control debt.