Payday loans are short term credit that a lender credits the borrower or the customer in an emergency provided the borrower has a stable employment with recurring income. A payday loan has a very comprehensive application process since it is a short term credit which is given on a very short term period. It is a temporary credit just like any other with a time period and rate of interest. The only difference is that this loan has a very short period with a very high rate of interest. But still people opt for this loan if they do not have any other option left and a payday loan is the only solution during the time of an emergency.
While many consider payday loans a blessing during the times of an emergency and when no other option is available, but there are so many reasons why one should avoid a payday loan. These points should be considered with very care before applying for a payday loan since it is your money and you are the one who will be a target of a very high rate of interest which can lead to a debt trap even with a stable job and recurring income. Following are some points to ponder upon:
High Rate Of Interest
A payday loan might be the solution to all your problems in an emergency but it might also be a cause of many more problems. Payday loans have a very high rate of interest because they are granted on a very short notice. Since they are short term loans of probably a time period of two to three weeks the rate of interest will surely leave a big dent on your budget. High rate of interest is the cause of many other financial problems which will begin once you avail a payday loan.
Harassment By The Lenders
Once you avail a payday loan you probably won’t get a call from your lenders but once you miss the payday of your loan the lenders start harassing the borrower. Then there is no line between them and your work hours, personal life or anything. They start calling at very odd hours and additional fee is charged over your principle amount and the high rate of interest.
Payday Loan Is A Step Towards Ruining Your Credit
If you can repay your payday loan with the additional fee easily then there is no problem availing a payday loan. But the problem arises when you miss the date of your repayment. When you know that you cannot afford the high rate of interest the payday loan has and still avail the loan, then you have signed for your funeral yourself. If your income cannot cover the high rate of interest a payday loan offers there is not point of availing it, it will do nothing more than ruining your credit points. More are the failed attempts to repay your loans more damage is done to your credit.
Direct Access To Your Bank Details
Bank account details, work details, residential details etc. is provided by you in advance before having a credit. You are serving all your details on a platter and there is no need for them to do any hard work. They have all the information concerning you which is very dangerous during the time in which cyber crime is increasing at an alarming rate. Technology has so much power that they can empty the bank vaults in a matter of seconds with good planning. Thus, payday loan is a very dangerous loan despite being the only solution to all your problems.
The Bottom Line
Thus, we can say that the payday loans are same as the personal loans, or say, the student loans in principle. However, they are a lot different as the interest rates on the payday loans are exorbitantly high. You should be very careful when you apply for a payday loan since it comes with a very high rate of interest, many formalities for a short term loan. These payday loans might leave a huge dent on your expenditure budget if you cannot afford one.
Therefore, you should choose very wisely when you avail any loan since it is your hard earned money and your efforts that will be at a cost at the end. You should always consult your family and friends first and ask for their help, consult as many lenders as you can before availing a payday loan. There are various other alternatives available so try looking at them first.