Disadvantages of Payday Loans – In case of unforeseen expenses, temporary needs or emergency costs, payday loans can be helpful to overcome your financial problems.
Besides advantages of payday loans, one should be aware of the disadvantages of payday loans before applying for a payday loan.
What Does Payday Loan Mean?
You can borrow a small amount of money due to pay back on or around your next payday. So, to cover your expenses such as rent, medical bills, repairement, etc.
Since you will be consider as a high-risk costumer, the interest rate you will be charge will be higher than normal as one of disadvantages of payday loans. Payday Loan will be settle according to your income and credit profile. The amount you can get can be up to $500 and the repayments can be with debit card payment, cash payoff, automatic payment from bank account or a post-date check.
Your minimum monthly income must be at least $1,000 and you also need to provide your home address, valid checking account number, driver’s license, social security number and proof of employment to the lender.
Disadvantages Of Payday Loans
- Sky- high interest rates make repayments difficult to complete.
- Additional fees may make your debt bigger and cause you to sink into a deeper debt.
- If you can not repay your loan on time and choose to apply for a new loan to pay of the previous one. You may end up falling in a debt cycle.
- If can not repay your loan on time and choose to roll over the loan every week. You will be have to pay the interest for each week and that causes you to trap into a debt cycle.
- Do not want to face a court judgment, you should payoff your debt on time.
- Payday loans often do not contain a right of recession.
- If you fail to repay, your credit score will be damaged.
Some Alternatives To Payday Loans
- Credit Unions : Since they are usually owned by their members and are not-for-profit entities. You may have a chance to get a more affordable interest rate.
- Compare lenders: You may have a chance to find an alternative lender who does not impose the high rollover fees.
- Call your creditor:You may have a chance to be offered a new payment plan.
- Credit counseling: Getting some credit advice from a reliable source. Would be extremely helpful to develop a budget.