If you’re facing financial difficulties, you might feel desperate, scared, or traumatized. One of the first things you might look for is a loan. If your credit cards are maxed out or your credit score is no good, then you may be tempted to look for a payday loan.
We’ve all been there. You’ve spent too much money either on useless items, or significant expenses like medical emergencies or car repair.
But getting started on these loans is an addictive, dangerous path to take because it almost guarantees you’ll have financial problems down the road. When you get a quick high-interest loan, you are not fixing a problem. Rather, you are setting your future self up for pain. Your short-term solution will cost much more money than you borrowed, and could have an adverse impact on your finances for years to come.
In this post, we’ll discuss payday loans and how to avoid using them. They are much different than other loans and financial products – like mortgages and student loans – so make sure you know what you’re getting yourself into.
What are Payday Loans?
Payday Loans are essentially cash advances that exist both online and offline, and they are offered by payday lenders at super high-interest rates. They are typically two-week loans where you guarantee payment by writing a check in advance or allowing them access to withdraw funds from your bank account. Before you sign up for one though, there are many things you need to know first.
These lenders offer extraordinarily high-interest rates, ranging from 129% to 651% or more, depending on what state you live in. You don’t have to have regular employment, but you do need to prove you have a steady stream of income and a bank account. However, some companies will still send the loan regardless. The whole point is to rope someone in for future payments.
Companies like these like to leech on the poor and disadvantaged. Not having to prove employment makes a quick loan appealing to someone on welfare or disability. On that note, most payday lenders do not require credit checks.
Besides the interest fees, you’ll need to pay loan fees, ranging from $15 to $45 per loan. So, if you live in a state like Nevada, you could borrow $500 and need to repay $3,285 in two weeks.
Nevada has one of the highest payday loan rates in the country, but you get the idea. Payday companies in all states have unreasonable prices, so it’s a good idea to avoid these unethical businesses.
Another concern is the growing trend of online scamming within the payday loan industry. Google does not always identify scammers, and it can be hard for them to control which company turns up on page one of a search. Giving unknown companies your personal information over the internet can lead to identity theft.
How to Avoid a Payday Loan
Avoiding them is easy. Just don’t take out a loan. But this is easier said when you’re not facing financial turmoil, of course.
Payday loans are a vicious cycle that can send you spiraling down a path of destruction. A better way to find fast cash is to look for quick ways to earn money. Finding a side gig where you do lawn work or another home service to make cash is an ideal solution.
Another way to find extra money is by holding a garage sale or Craigslisting some of your unneeded items. Making a few phone calls to friends or relatives to see if you have something they might need might give you some spare cash. Often, friends are willing to take what you have if you offer a discount, especially if they know you are hurting financially.
You can also try examining your budget. What are some expenses you could cut, or creditors you could call to arrange a late payment or installments? Often, companies will work with you on payment terms if you call and chat with them about your problem.
If you must borrow money, the last option would be to ask friends and family or take out a personal loan. Personal loans and credit cards may not have fantastic rates, but they will be much better than a payday loan.
Being in debt can lead to depression, despair, and isolation. But taking a payday loan is almost a guarantee to give yourself future problems. Getting hooked on these types of loans will lead to a chain of money issues that could cripple your financial future.
The best way to avoid a payday loan is simply not to take one. Then, when you get past this struggle, consider saving money into an emergency fund so that you’ll never be tempted to take one of these loans again.
What’s your story? Do you have any interesting experiences with payday loans?