Payday loans present a tempting alternative to bank loans and a good solution to anyone who needs a quick fix of cash. However, payday loans are not nearly as good a deal as they appear to be. They have many dangerous aspects and it’s easy to get trapped in a cycle of debt, worse than even credit cards are notorious for.
How They Work
To understand how to avoid these hazards you have to know a little about how payday loans work and why they are different from regular loans. Regular bank loans are large sums of money that you pay interest on and pay back over a long period of time. Payday loans are quick same day loans and can sometimes be more like loan sharking; you have a small loan that is paid back with interest in a short amount of time. The smaller amounts of money often get people thinking that it won’t be so bad to borrow.
The primary difference to be aware of is that with a payday loan, the amount you owe in interest can quickly exceed that which you originally borrowed. This means you can owe more than what the loan was, plus the loan itself. This can catch many people out and can cause them not to balance their budget properly, leading to needing another payday loan and so the cycle continues.
Avoiding The Pitfalls
There are a few key ways to avoid this. The first is do not get a payday loan except for an absolute dire emergency; do not take one out because you want to buy a TV on sale or a video game you are just a bit short on. The second is budget; be extremely strict with your budget once you get that loan. Make sure that money goes directly where it is needed, figure out how much you will owe in total and remember you will be that much short next paycheck too. Doing so will help you avoid getting stuck under the cycle of needing payday loans to pay off payday loans.
By following these steps, you should be able to avoid the worst troubles that payday loans can throw at you. If you are already in the cycle of debt there is little you can do to get out of it but you do have some options. Try cutting corners wherever you can to make ends meet so you don’t have to take out another loan. Grit your teeth and try to get overtime or extra work shifts; anything to make up that gap. It is normally a bad idea to use credit to pay for credit but if you can, maybe put the payday loan payoff on a credit card, ultimately the interest will be less in the long run and it will give you more time to get back in the black.
Sadly payday loans are a necessary evil in today’s world. They can give you a boost when you need it the most, but they must be used with caution or they can lead to disaster.
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