Quick cash easily obtained from Payday loans, may seem like a great way to pay bills, but they're far more dangerous than you'd expect.
What are Payday loans? - Payday loans are short-term, $500 to $1,000 unsecured cash advances with high interest rates. These loans can be easily acquired online or at brickand-mortar stores, and are often used to get people out of financially difficult situations. According to a study by the Global Financial Literacy Excellence Center at George Washington University, 42% of millennials have used Payday loans as a way of dealing with debt or upcoming bills such as rent, utilities, food, or medical bills. People are targeted through ads on TV, radio, online, and these companies prey on those who live paycheck to paycheck.
Why are Payday loans so dangerous? - Simply put, their interest rates are usually anywhere from 300%-500% annually, and commonly disguised as fees. By comparison, typical credit card rates fall within a range of 15%-30% APR and Personal Loan rates are even lower. Because Payday loan interest rates are so incredibly high and the loan is so hard to pay off, they create a cycle of debt that is extremely difficult to break. Usually, when a Payday loan comes due and you can’t pay the full amount, many lenders will allow you to pay the initial fee only to extend the due date. But, then another fee for the same amount is added on to the principal, creating a snowball effect. Some Payday lenders even want to access your bank account claiming that it makes it easier than writing traditional checks. However, this is just a ploy to get their money back and apply even more fees. With more and more debt piling on from an initial loan meant to get you out of debt, these high-risk loans leave you further in the hole subjecting you to repeated calls from ruthless debt collectors. Ultimately, Payday loans can significantly harm your credit score too.
Are there alternatives to Payday loans? - Yes! There are much better options and ways to get financial support. Before you consider a Payday loan, contact us at 800-535-2129 or visit us and we’ll help find the option that’s best for you. You can also set yourself up for long-term success by talking with our Financial Wellness Counselor for free financial advice.