The Truth About Payday Loans
Are payday loans really your best bet?
The commercials make payday loans sound so easy. Simply go in and write them a check and they’ll hold it till payday. Nothing could be more easy or more innocent, right? Wrong! Payday loans are loan sharks in disguise my friend, and if you’re thinking about getting one, you’d better think twice.
The Concept of Payday Loans
Payday loans are a relatively simple concept on the surface. You simply write a check for the amount of the loan plus interest and then when payday comes, the payday loans company will cash your check. The trick is, people who get payday loans can’t afford to pay the loan back all at once so they wind up taking one payday loan after another, after another and the interest starts to skyrocket.
Where You Run Into Trouble with Payday Loans
Let’s say you were looking into payday loans because your car broke down. Say you needed four hundred dollars for the repair and you weren’t getting paid for four more days. If you need to get to and from work, you can’t be without your car for four full days so you go and get a payday loan. Say you pay forty dollars in interest. Not bad right? $40 is a small price to pay to get your car back.
So payday comes around but you can’t pay the payday loan back in full because you need the money from your paycheck for other bills. What do you do? The payday loans company has a simple answer for you, take out another payday loan, pay another forty dollars. You do it because you have no other choice.
And Another Week Ends
So far you’ve paid $80 to borrow $400 to fix your car. Week three rolls around and you still can’t afford to pay back the payday loan in full so you take out another payday loan to pay off that payday loan and you pay another $40. So now you’ve paid $120 to borrow $400. The payday loans picture isn’t starting to look so good, is it?
You’re Better Off Using A Credit Card
In all honesty, you’re better off using a credit card or borrowing money from family or friends than taking out multiple payday loans. At the rate you’re going in the example, you’re going to end up paying more than $400 to borrow $400 and that’s not good. This is the vicious cycle that payday loans companies hope you fall into.