When you need money quickly, payday loans tend to be the most appealing option. They can get your out of any debt or you can purchase the items you want fast, and that definitely seems quite appealing. With that in mind, the payday loan costs can be very high. The average interest rate on a payday loan is 391%, and that’s if you repay it on time. According to the Consumer Financial Protection Bureau, around 80% of the payday loans aren’t paid back in two weeks or a month, depending on when the lender agrees with you. If you don’t pay the loan on time, then the interest rate will go to 521% and it will increase more and more if you are unable to repay the debt. Initially the payday loans can be very appealing, but the fact that debt management programs, personal loans, online lending and credit cards have way lower interest rates of up to 10%-40% at most, you really have to find the right way to tackle this type of situation and you will be more than fine.
Obviously, the main appeal is convenience. You just need a bank account number and a pay stub as well as your ID. They will check your financial situation quickly and if everything checks out you receive the amount you need on the spot. This is very appealing to people that just need cash fast. Depending on the options you can wait a lot of time getting the amount you need. So the payday loans are faster and easier to use, which is why a lot of people actually try them out and end up in even more debt. The payday lenders charge an interest of up to $20 for every $100 you borrow. That doesn’t seem too bad, but if you add things up there will be quite a lot of challenges. The more you require, the more you have to pay back.
Normally there will be a 2-week deadline to give the money back. If you don’t, they will add up the interest rate to your loaned amount. And if 2 more weeks pass, they will add up the same amount again. So if you get $375 in the form of payday loans and you don’t repay that loan in a month, then it can become a $500 loan within 30 days of acquiring it. Are payday loans a good option? If you need money fast and you are a financially responsible person, yes. But if you want loans all the time, then you obviously need a simpler solution because the high interest rate makes this type of loan not as good as the others on the market. You just have to pick the right option, there are many situations where payday loans can help you get out of trouble, health issues and so on. Which is why you need to think about your overall budget and how you handle your expenses!