Payday loans cause a lot of difficulty for those that already have financial difficulties. This type of loan is meant for emergency purposes and not for maintaining finances which is where a lot of consumers get tripped up. Only take a payday loan if you are able to pay back the loan on time and not take another.
The fees associated with payday loans are quite costly. On an average $300 loan, as an example, you are likely to pay almost $100 more in fees. Having to come up with this extra money each time you have to pay back the loan, it puts you in a deeper financial hole.
Causes more Financial Difficulties
With the existing financial difficulties that most consumers have, interest fees and administrative fees make it even more difficult to repay these loans. Then it comes to the cycle where you are taking another payday loan to pay back the first and so on. Eventually you are just working to pay back all of these payday loans.
This cycle has led many consumers to absolute financial ruin to the point where they are filing for bankruptcy and losing their homes and cars. These instances alone are why it is important to only take these loans every once-in-awhile to avoid this possibility.
Does not help Credit
Payday lenders do not report to credit agencies. These loans are already for people with credit difficulties. With the high fees associated with the loans. All you are really doing is hurting your finances and neglecting bills on credit accounts to repay the payday loans. The biggest concern becomes paying back these loans and their fees and is the reason they should be used sparingly. Your other accounts, such as car payments, mortgage payments, utility bills, cell phone bills and anything that reflects on your credit report takes a back seat.
Keep in mind the financial damage that taking frequent payday loans can have on your financial well-being. As aforementioned, only take a payday loan if you can pay it back on time and not take another one to regain the funds. The high fees and interest rates significantly increase the amount you pay back. The more you borrow, the more you repay in fees so keep this in mind as well. It can come to a point where the interest payments make the amount to be repaid your entire paycheck. Lenders are usually good about only lending what you can pay back including the fees and interest, just try not to get caught up in the cycle.