4 Ways Most People Underestimate Their Paday Loans
Payday loans can be a great blessing in the right time if used properly. Many people however do not quite give them the respect they deserve until it is too late and they are facing problems as a result of taking out their initial loan. Knowing all of the rules, regulations and restrictions regarding payday loans in advance can help to keep people from making costly mistakes and potentially falling even further into severe debt.
1. Thinking the fees are ’small’
Payday loans aren’t cheap by any measure. The average personal loan you can get from a bank today will run you between 10%-15% interest on the loan. Applying the same formula to a payday loan - any payday loan and you will find that the interest rate is probably at least 300% and can be as high as more than 1,000%! It may sound good on paper; paying only $12.00 per hundred dollars borrowed, but the reality is that you are paying an arm and a leg for that loan and are receiving great anesthesia so you don’t feel the amputation.
2. Thinking you can pay the loan back on time
Most people do, in fact, pay their payday loans on time with their next paycheck. Far too many people, however suddenly realize when they get their check that they aren’t quite going to be able to make their other financial obligations if they allow the payday loan lender to deposit that check after all. Then the mistake reverts back to #1…thinking another week or two of leniency is worth it for the ’small’ fee imposed. Big mistake.
3. Thinking to pay back one payday lender by borrowing from another
This line of thinking is somewhat logic-defying. It functions by turning a business decision (borrowing money) into a personal one, (being able to make ONE store happy by paying them off with a different loan). The truth of the matter is that you are in the exact same financial bind as you were in when you stuck with only one store. Payday Loan stores are not in business to make friends, so paying off one by borrowing from another is not going to get you any credit (literally or figuratively).
4. Not thinking to find alternative means of repayment
If you find yourself in trouble and unable to pay back a payday loan at the scheduled time, rather than putting off payment for another pay period and suffering more fines, consider instead getting a personal loan from the bank to pay back the payday loan, or borrowing money from friends or family, or even seeing of your employer can lend you the money and then take it out of your check over time in the future. Any one of these options - though they may mean swallowing a heaping dose of pride - is better than even one more $12.00 per $100.00 fee.
