However, payday loans are exorbitant. This can often lead, not the borrowers in a spiral of rapidly growing debt. Consideration of the issue from different angles to create a complete picture.
Firstly, the advantages. Here is the reason why cash withdrawals tremendous resource for in May.
You can bad credit and still for a payday loan. In most cases, no credit check is done.
The process is fast, requires only 20 minutes. You can find the lenders, based on the approval in 30 seconds!
There is no possibility that the initial cost of buy now pay later mentality find their expression.
You can personally at a branch, by phone or online.
You have the funds deposited into your bank account within 24 hours.
In comparison with other sources of money, payday loans are discreet, nobody should know.
The transactions are secure your personal information will remain confidential.
If you click on an emergency such as unexpected medical expenses, possibly, only the money now. The speed and convenience of a cash advance is useful.
What are the disadvantages?
The most obvious costs. A payday loan can cost say $ 15 every two weeks. If you are borrowing only for two weeks, which does not look like much. However, when calculating the annual percentage rate (APR), you can see what is 391%!
If you do not think it's enough, let me this question. If you have money in the stock market, what you need for a good annual return? 20%? Maybe 30%? If you have a yield of 20% (average) in stocks from year to year, it's very good. And for an investment, which are generally considered high risk.
Now compare that with what the payday loan companies. With a return on their money, they can not anywhere else on this planet!
There is another, less obvious reason payday loans are dangerous. It has been estimated that over 60% of borrowers roll payday loans. Many of these loans to be repeated.
Enter some numbers, so you can clearly see that the rollovers.
I think, to borrow $ 400 for two weeks at a price of $ 15 per $ 100 for two weeks. At the end of two weeks, you owe a total of $ 460th
Suppose you do not have to repay $ 400 within two weeks. Instead, it calls for a change. Therefore, you pay the loan costs $ 60 and agree to refinance the loan for another two weeks. The total cost of the loan at the end of 4 weeks in May will be as follows:
Original loan amount: $ 400
Fresh loan fees: $ 60
Late fees: $ 60 (the end of the acceptance, for the same amount as the cost of the loan)
The loan is already paid prices: $ 60
Total: $ 580
At the end of this period (the 4 weeks from the day he took the credit), you decide that you do not have $ 580 available, and the requirement for the use of a loan for another two weeks. Therefore, the total cost at the end of 6 weeks:
Original loan amount: $ 400
Fresh loan fees: $ 60
Late fees: $ 60
The loan is already paid Rates: $ 120
And at the end of the fee: $ 60
Total: $ 700
If this process up to six months (or more precisely, for 24 weeks) is that it is possible that the total cost:
Original loan amount: $ 400
Fresh loan fees: $ 60
Late fees: $ 60
The loan is already paid Rates: $ 660
And at the end of the fees: $ 600
Total: $ 1780
For a first loan of $ 400 in just 6 months, the payday loan the collection of fees and expenses of $ 1380 from you. This is 3.45-times the amount you borrowed. In relation to the APR 749.5%! If more than 60% of borrowers roll over their loans, it is not surprising that many companies payday loan is very profitable!
Costs snowball effect, which can easily be incorporated into a debt trap if you are addicted to payday loans.
What are the main points to remember when it comes to payday loan companies? Two things:
First, if possible. The best way is, of course, your finances fully under control, so you always have money and / or loans to respond to emergencies.
Secondly, if you decide to borrow from payday loan companies, loans that an amount of 100% safe, you can at the end of the term. If this amount is too low to suit your needs, get additional funds from other sources. Since rolling cash withdrawals is one of the worst things you can do for you.
3 comments:
Payday loans are a good idea and can be helpful for those that need a small amount of money quickly for a short period of time. These loans typically have a higher fee associated with them, but there are only one or two payments so the actual dollars are not as much as some may think. Most of the time each state has a set limit on how much can be charged and it's usually quite reasonable given the situation. I for one have used payday loans in the past and they help me get caught up until I got my next paycheck. I used it responsibly and it worked for me, and could help others as well. There are many good sites for online payday loans instantly but make sure to read everything before signing.
thanks for the details... I guess I have to read the terms carefully.
For most people borrowing money is not the way they would choose to go IF they had a choice; for people with bad credit it’s a double nightmare.It can require a great deal of paperwork and turn into an embarrassing situation. Thus, consumers prefer payday loans to face small, unanticipated expenses while avoiding costly bounced-check fees and overdue payment penalties.
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