If you’ve ever found yourself in need of some quick cash—and who hasn’t?—you’re probably well aware of what’s called a “payday loan.” This resource is the go-to option for countless people all over the country when they need money fast. Unfortunately, it should be avoided at all costs.
The idea behind a payday loan is quite simple, which is one of the reasons it’s so attractive. Essentially, it’s for people who don’t need a lot of money, just enough to make it to their next payday, or whenever they’ll be seeing more income. Traditional banks don’t deal with such small amounts, amongst other things, which leaves these people in quite the predicament.
“Fortunately” for them, they can just go to a payday lender and borrow the money they need. All the collateral they are required to provide is a check made out for the amount they owe dated for the day after their next payday.
While there are many problems involved here, the most obvious should be the high interest rates. If you’re in the military, you can pay up to 36% interest on the borrowed sum. Non-military members, however, can owe as much as 300%!
This is bad enough, but you may find a way to justify the amount for a one-off situation. Unfortunately, research has shown, time and time again, that payday loans lead down the path to constant debt. A major issue is that one loan charges you so much, you eventually need another to dig your way out of the debt it’s put you in. From there, it‘s a downward spiral.
Plus, there are usually other options. Even if it means borrowing from loved ones or selling off property, just about anything is better than a payday loan.
So if you find yourself in financial trouble, take a moment to breathe and think through the predicament. Payday loans are never the solution.