In life, there is no predicting when an emergency will occur or when disaster might strike. Most of the time, it happens when we’re least prepared, both emotionally and financially. Emotional distress and financial burdens are a recipe for making impulsive decisions that can lead us down a rabbit hole that is difficult to get out of.
People, in their desperation, might take out payday loans. On paper, a payday loan may seem like an excellent and easy way to get fast cash. You borrow a certain amount of money at a fee, and you pay that amount back before your next salary arrives. If you already have a good grasp of your finances and are stable enough, this type of loan shouldn’t present any problems.
However, for people still finding their financial footing, this can be a slippery slope. Here are a few reasons you should avoid payday loans:
1. Payday Loans Come with High Interest and High Fees
Payday loans are expensive. They charge you very high fees and give you very little time to come up with the total payment. Payday loans are meant to be short-term quick fixes, but if you’re already dealing with a pressing financial problem, this loan will only add to your problems.
Chances are, if you’re taking out a payday loan, you’re already strapped for cash, meaning you’ll be hard-pressed to find the money to pay it back on time. This means you will either have to default or renew your loan. With the combination of fees and interest piling up, if you’re not careful, this can land you with a debt triple the amount you started with.
2. You May Fall Into the Cycle of Debt
Once you miss two or three payments on your loan, you will begin accumulating debt. Financial stability is hard to achieve when you’re not only paying for your bills but also catching up to debt that is rapidly increasing.
Once you’ve renewed the loan, it becomes too much money to pay back. On top of what you owe, you may have additional fees and interest. Even when you can pay the first loan off, the second loan will still remain. You might start to realize that these loans are designed to keep you trapped in a cycle of debt.
3. It Is Unhealthy Financial Behavior
That’s the biggest problem with a payday loan. It will be hard to focus on building your life or savings if you’re working to pay off a debt. Unlike traditional loans, you won’t have the luxury of time to slowly but surely take care of your finances. Here, you’ll be left scrambling once or twice every month to pay everything off.
And while it doesn’t happen to everybody, you might find yourself taking out new loans just to pay for old ones. This means transacting with more expensive, high-interest lenders because it will be challenging to get a loan from banks at this point.
The Bottom Line
Payday loans are not a bad idea if you’re careful and not already financially. However, if you are in a tough spot, there are better and less expensive ways to find cash. Consider your options, because it will pay to think about making this decision.
For example, if you have a good relationship with your creditors, they might be able to help you out. Even a friend or family member that is willing to help and give you time to get back on your feet is miles better than possibly sinking yourself into debt.
Here at Mid-Town Loans, we understand that life can be difficult. Some financial pickles are time-sensitive, and we’re not here to overwhelm you. We want to help you. We offer ,small personal loans with fair interest rates and no hidden fees. Let us help you; apply for a loan today!