Are Payday Loans A Bad Idea

All of us have times in our lives where the money is short and we have unexpected expenses appear such as car repairs or healthcare expenses.  This might be the time where the commercials that are advertising for a short-term payday loan might sound appealing.  This sounds like the perfect way to get the money you need quickly and get the your bill paid.  However this might not be the best solution for you and you might want to avoid a payday loan altogether after reading this article.

What Is A Payday Loan

A payday loan is a short-term loan and is for a dollar amount usually $2500 or less.  This unsecured loan is easy to apply for and is usually approved quickly, many times within minutes, and the money from the loan is usually deposited into your bank account the very same day.  This might sound convenient and the easy way to get the money you need but it might not be the best decision to make for your financial troubles.  Below you will find a few reasons why you should avoid obtaining a payday loan.

Very High Interest Rates

Having the convenient way to obtain access to money that you need quickly will cost you a hefty price in interest.  The amount of interest that is charged on payday loans is very high and is not always wrote into the contract in an obvious form so you are surprised when you go to pay the loan off.  This makes it almost impossible for someone who is having money trouble to begin with to pay off the loan so they have to roll over the balance and that will cost them even more in the long run.

Short Repayment Period

Not only will you find that the interest rate is very high but you will also find that the repayment period is very short.  In most cases the loan will need to be paid back in full by your next payday.  Many payday loan companies will offer you the option of rolling over your payment but this will cost you in fees and interest and will often lead to you getting further behind in your payments with a balance larger than you began with.

There Are Other Options Available

If you are in a situation where you need money quickly there might be other options for you other than a payday loan.  You might be able to work out a plan with your bank for an authorized overdraft system in case you run short in your checking account.  You might also be able to put those unexpected expenses on a credit card, or look into other lending options such as peer-to-peer lending.

Conclusion

If you are in a financial emergency with unexpected expenses by doing some simple research you can find solutions that will be better for you financially than a payday loan and will cost you less money in the long run.  When in doubt you can always ask a banking professional.  They will be able to answer any questions you may have and deter you away from obtaining a payday loan.

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