When you need cash for an emergency, you tend to go ahead with a payday loan. In fact, a payday loan would look like the only path of survival. But most of the people who obtain payday loans for their emergency cash needs end up with hassle and frustration in the long run. Therefore, it is important for you to take a look at the unseen aspect of payday loans and take appropriate steps in order to stay away from it.
Below mentioned are some prominent reasons, which would justify why payday loans are never a good idea available for you to consider.
What exactly are payday loans?
Before you take a look at the negative aspects of payday loans, it is better to have a basic understanding on what exactly the payday loans are and what they can lead you to. A payday loan is a kind of a short-term loan. You are borrowing the loan for a couple of weeks. Ideally, you should be in a position to settle this loan on your next payday.
When providing the loan, the lenders will take a look at your bank accounts and income statements. Then they will determine the ability of you to repay the loan by the next payday.
Why shouldn’t you go ahead with payday loans?
Now you know what payday loans are all about. With that in mind, let’s take a look at the reasons why you are never encouraged to go forward with them.
- Payday loans are expensive
Payday loans can be considered as one of the most expensive types of loans that you can borrow. If you take a look at an expensive credit card, you will notice that the interest rate is somewhere around 28%. But the interest associated with a payday loan is much above than that. For example, if you obtain a payday loan of around $100 for a period of 15 days, you will have to pay a massive annual interest, which goes up to 400%. If you are not in a position to pay such a high amount of money as the interest, you shouldn’t even think about obtaining a payday loan. Usually, most of the people who are not in a position to obtain mainstream loans tend to go ahead with payday loans. It is true that you can easily get cash to your hands with the assistance of a payday loan. But you will have to pay a lot of money out of your pocket for the enhanced convenience offered.
- You will get stuck in the payday loans cycle
From the recent studies, it has been identified that most of the people who obtain payday loans tend to get stuck in a repeat cycle. This is another reason why you are encouraged to stay away from payday loans. When you obtain a payday loan, you will have to spend a considerable amount of money on your next payday to settle it along with the interest. With this, you will not have enough money to survive until your next payday. Along with that, you will be tempted to go ahead and obtain another payday loan. That’s how you get stuck in a cycle. When you get stuck in this kind of a cycle, you will find it as a difficult task to overcome it. That’s where your credit ratings would go down.
- Your debt will grow fast
Once you obtain a payday loan, your debt will grow fast. That’s mainly because you will have to pay money at an extremely high rate of interest. In fact, you will be spending around three to ten times of the amount that you have initially borrowed with the payday loan. This can lead you towards debt. Your debt will grow faster than you imagine. As a result, you will end up with a lot of financial difficulties in the long run.
- You can easily obtain payday loans
As mentioned earlier, it is extremely easy for you to obtain a payday loan. This can also be considered as one of the major drawbacks associated with it. That’s because you will be tempted to go ahead with it, when you come across a financial requirement. You will even tend to obtain a payday loan at your lunch break. This is never a good habit. That’s because you never provide any time for you to think whether obtaining the loan is a good idea or not. You believe that it is the best solution out of all available options and go ahead with it blindly. With this, you will end up with a lot of negative consequences in the long run. When you identify those mistakes, you are too late.
- You will have to provide your bank account access
When you are obtaining a payday loan, you will be asked to provide your bank account access to the company that provides it. This can be considered as another negative effect linked with these loans. Your bank account contains a lot of sensitive information related to you. Hence, you should never go ahead and share the bank account details with another party. This is another major reason available for you to stay away from obtaining payday loans.
- You will end up with stress
Most of the people who obtain payday loans to cater their emergency financial requirements end up with stress. That’s because the payday loans are linked with a higher rate of interest and you will come to a situation where you cannot settle them. In such a situation, you will end up with disappointment and frustration. This can bring in a lot of stress to your mind.
Due to all these reasons, you will need to think twice before you go ahead and obtain a payday loan. It is better to stay away from these loans whenever possible. Any help for financial problems contact gtacredit.com or call 416 650 1100