Pay day loans have grown increasingly popular over the past several years. Unexpected expenses hit people at the worst times so individuals take out pay day loans to pay for said expense. However, most people are unaware of the facts and risks that are involved with obtaining a high interest pay day loan. Taking the time to understand the facts of these short-term high cost loans will help individuals make better decisions in regards to obtaining these loans.
Easy to Obtain – Weighing out the Pros and Cons
Pay day loans are fairly easy to obtain in the U.S as most pay day loan companies only require steady employment and a checking account. While they do help individuals take care of financial obligations before pay day, it is important to realize that just because they are easy to obtain does not mean one should apply for them. People can even apply for them via their mobile phones. The more loans that someone applies for, the more it can damage their credit. The fact that they are easy to obtain makes them extremely dangerous.
Fees, Fees and More Fees
Most individuals are unaware of what they are getting into with pay day loans in terms of fees. The desperation that comes with needing the extra money for expenses, tends to cloud the brains of many consumers. Instead of tacking on an interest rate, pay day loan companies typically charge a fee. On a $100 loan they tack on a fee of $25 which in terms of interest, is 25%. A credit card does not charge you quite that much for an entire year of credit card service and usage. This is something very important to consider when obtaining a new pay day loan.
Pay day Loan Addiction
Many people who obtain pay day loans, are already in dire financial situations and are unable to pay them back. So they obtain another pay day loan to pay off the previous one, and it becomes an endless cycle. If one cannot afford to payback a loan, they should not obtain one in the first place. Pay day loans are not to be used as a means to pay off debts every month. It is causing more debt in the long-term. Finding a new way to budget financially every month will help individuals to put back money for financial emergencies and not seek out loans in which they are unable to afford.