Payday loans are usually the loans that everyone runs to nowadays just to get some emergency money. These loans are given to you with the understanding that you will pay for them with your next paycheck. While there is nothing wrong with payday loans per se, you could do better. The loans are not
the only option left to you.
There are many reasons to avoid payday loans. One of them is the fact that a payday loan is only a short-term loan. You will need to pay off what you owe within weeks. This is usually not a very good option if money is tight. Having such a short time to pay off the loan means that you have no option but to find the money to pay off what you owe from somewhere or risk defaulting.
The short time that exists for you to pay off the loan also comes with a high price tag. Lenders who give you a payday loan are in the business to make money. Because they have such a short time to get that money from you, they will get as much as they can. That is why you will have to pay off the loan together with a very high interest rate. After all, they did give you money to pay off your emergency bills when you needed it.
A payday loan lender is not like a traditional lender. If you have a poor credit history, you are likely to go to such a lender because there are no credit checks involved. What you do not know is that you will be considered a high-risk borrower. With that too, come higher interest rates. The only collateral that you have after all will be your proof of current employment. You may lose that job tomorrow and default on the loan. That risk, therefore, is what will cost you so much money in interest.
It is always better to have your credit analyzed and any inaccuracies corrected before getting a payday loan. That way you stand a better chance of getting a lower interest rate traditional loan that is much easier to pay off.
In the event that you lose your job, you may be able to pay off your monthly loan payments if they were of lower value. However, with a payday loan, that is not going to be possible. The high interest rates will be hard to sustain for any length of time if you do not have a steady paycheck. Your other bills will still have to be paid. Before you know it, your debts will spiral, and you may have to declare bankruptcy. It is always much better to be informed financially so that you can know how to manage your money better.
Some lenders who give payday loans are very unscrupulous. Some will harass you while others may even resort to violence if you fail to pay the big debt you owe them. You should, therefore, ensure that you find a loan from regulated and traditional lenders. Their loans may be harder to get, unlike payday ones, but will be easier to pay off in the end. Now you know the reasons to avoid payday loans.
