Payday loans are really helpful when you need access to quick cash. They’re easy to access and there’s little paperwork involved. The trouble is that customers may take this type of loan with good intentions, but can soon become overwhelmed if they’re unable to exercise enough discipline.
While the payday loan offers convenience for those with a poor credit record, there are also several disadvantages that you should know about before taking advantage of this quick cash access method.
Payday loans are one of the easiest ways to access fast cash. This is why they’re so tricky. If you’re not careful, you could soon find that your borrowing habits are working against you. Where you told yourself that you just needed a loan for a once-off payment and you have the income to repay the loan, you find that money is needed for another emergency during the month.
Before you know it, your entire income is going toward paying off your payday loan. Now you cannot access credit anywhere else, and your work every day is focused on paying back the loan provider.
Annuities are good for quick cash
Even if your credit rating has taken a turn for the worse, you can sell your annuity if you own one. If you’re up to date with your annuity payment, speak to an adviser about selling this valuable asset when you need money fairly quickly. Although your payments may not be up to date, an adviser will be able to tell you the value of the annuity.
You can then consider a total sale, partial or a lump sum sale of the annuity to gain access to your money. Payments can take up to a month to become available, but at least you won’t owe the payday loan provider any money if you select this quick cash option.
Payday loans cost a lot
The bottom line is that a payday loan might be convenient, but it is going to be very expensive. You might reason that an extra fee is affordable when you need money in a hurry, but take a step back. The average interest rates on these types of loans can go as high as 400% to even 800%.
When compared to personal and credit card loans that range between 4 and 36 percent, this rate is extremely expensive. One or two of these loans can be enough to sink you. If you’re not careful, you could quickly find that you’re left with nothing to take home.
Payday loans are exploitative
Because your labor has already been provided as security, the payday loan knows they control the payback of the loan. Loan providers also know that you’re desperate for money and take advantage of your circumstances.
Essentially, payday loans include unreasonable conditions that are designed to benefit the lender. They offer interest rates that make it impossible to repay and frequently include misleading contracts or clauses.
Customers who take out these loans will often find themselves unable to make repayments, effectively trapping themselves in a miserable cycle of inescapable debt.
Lenders typically target customers from minority groups and those who are known to generate low incomes. These groups make for easy pickings for unscrupulous money lenders. Also, when people are desperate for quick cash, they’re less inclined to read the fine print.
They’re easily exploited because the lender can access their bank accounts, and the chances of getting out of the debt cycle are slim to none. Lenders can literally start charging exorbitant fees for overdue payments on top of already high interest rates. Avoid this type of borrowing to protect yourself and your family before you’re left with nothing.