Payday Loans: The Good, the Not So Good, and the Really Bad

People borrow money for all sorts of reasons. Some people need the money to pay their bills while waiting for their next paycheck, others just want to loan some extra money to help out a friend, and many people get payday loans because they don’t have enough savings. Whatever your reason for borrowing money, lenders compete with each other on interest rates so you can usually get pretty good deals if you do your research. One type of lender that specializes in lending to people who need fast cash is known as ‘payday lenders’. (Rapid Cash)

What are payday loans? 

They are short-term, unsecured loans that borrowers can use to cover emergency expenses. Payday loans usually have a very high interest rate and must be repaid in a short period of time. 

  • The Good: 

    • Payday loans are fast and easy to obtain.
    • The amount you can borrow is typically small, so it’s perfect for emergencies.
    • Payday loans usually come with lower interest rates than other types of loans. 
  • The Not So Good: 

    • The interest rates on payday loans can be high if you don’t pay them back on time.
    • If you don’t have enough money to pay back the loan plus interest, you may be charged additional fees.
    • Payday loans can be hard to repay. If you can’t, then you could be stuck with bad credit and a cycle of debt 
  • The Really Bad: 

    • Payday loans are very expensive.
    • You should never borrow more than you can afford to pay back quickly. If you do this, the payday loan becomes more like a high-interest credit card loan because it will take you longer to repay. Over time, this can lead to financial disaster!
    • If the money isn’t repaid on time, then payday loan companies will offer you rollover loans. This means that if you fail to pay back your first loan within the term of a 14-day period, you’re offered another one and this repeats until you eventually pay it all back. The Good news is, this practice is illegal in some states across America so be sure to check with your state’s laws before taking out a payday loan. 

When you’re in a pinch, and need money right now, there is no other solution but to take out a payday loan. These sorts of short-term loans can be very helpful in many situations; especially when you need money for an unexpected expense such as a medical bill or car repair. 

Payday loans may seem like the answer when you’re caught short between paychecks, but they can create more financial problems down the road. If you’re considering taking out a payday loan, it’s important to weigh the pros and cons carefully. Be sure to consider how the loan will impact your finances both in the short-term and long-term. If you find yourself without enough money in your checking account and needing cash now, a payday lender may be the right option for you. (Rapid Cash)

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