| But, there are cons to payday loans that people do not hear all about. In fact, many times, the person who needs the money most will end up paying heftyly for borrowing it. Here, we will talk a little about the cons of payday loans. While we are not discouraging anyone not to use the services of a payday loan company, it is still quite wise to know ahead of time what you are getting into and to ensure that you do not get taken advantage of. |
| Payday loans are available to just about anyone. The companies are just about everywhere. Most of the time, we don’t stop to consider which payday loan company to go with. Instead, we go to the one closest. So, for our example, let us say that you needed cash for an emergency expense. Perhaps your car broke down and you need the cash to pay the repair costs so that you can make it to and from work. You can’t earn money, after all, if you can not get to work in the first place. In order to solve your cash flow problem, you head to the local payday loan company and tell them your situation. They may not even want to know why you need the money.
You are asked, then for some proof of identification. That is standard. The payday loan company is also going to want to know how much you make a week. You will need to show paycheck stubs or some other form of proof of income. They may run a credit check, they may not. Then, they will start handing you the forms. Read them! In your hurry, you don’t read them thoroughly and you get out of there in less than thirty minutes with the cash you need. But, this is where you could potentially go wrong.
Did you verify the interest rate they will charge you on your loan? This is often one of the biggest issues with using payday loans. The interest rate on some of the loans is outrageous! Not only that, but let’s say that you don’t make your payment of the loan in time. Some institutions may end up charging you through the roof, upwards of 100% of the original amount charged! Whatever you do, do not default on this loan. You need to pay it back, in full in the agreed upon time period. Some institutions will have your write a check to them that they will then cash on the agreed upon day. Those funds better be there or you’ll be getting returned check fees, bounced check fees, and over draft charges! In the end, if you miss the repayment of your payday loan, you may end up, well, paying double or triple of what you borrowed. This is definitely a con!
There are other cons to payday loans as well. Realize that they are not paid back in payments, but in one lump sum payment. Often you will have up to two weeks or even one month to pay them back. Again, they may require that you write them a check in the amount that you borrow that they will later cash. If the funds are not there, you can get a negative mark on your credit report because of it.
Another area that is probably the worst con involved with payday loans is being stuck in a payday loan cycle. When you end up borrowing money against your future check to pay back money from a previous payday loan, you know you are in trouble. Sometimes, we borrow the money we need to get through, but really, we have no way of making up that money later on. Instead, we borrow to pay back our loans. We never get ahead and since we are paying fees on top of fees, we end up throwing money down the drain. Not a good solution!
The end result is this, if you need to use a payday loan to pay for an emergency expense, do so. But, know what you are getting into and insure that you will have a way of paying the money back later on. Make that payback payment and don’t make going to a payday loan company a habit. |
