10 Jul Payday Loans Are Dangerous
A payday loan might provide you with a quick option to borrow modest sums of money when you need cash urgently due to a financial emergency and you can be eligible even if your credit is terrible. These short-term loans, however, are risky and expensive. One of the most costly forms of credit accessible is a payday loan.
For borrowers, payday loans are dangerous alternatives. To begin with, they have interest rates that are astronomically high – up to 400% annually. It can be quite challenging for you to repay the loan and still pay your bills if you were already living paycheck to paycheck, especially because the amount you borrowed would have cut into your take-home earnings.
How do they work?
Payday loans are popular because you may obtain one in a relatively short amount of time. Residents of South Africa can apply for payday loans online and receive approval and the funds in their bank accounts in a day or two. There is also little documentation necessary to apply for one and the completion of a credit report is not required in order to qualify.
How much does a payday loan cost?
Your repayment amount will depend on the amount of your loan and the interest rate that the lender is willing to provide you. You may anticipate interest rates of up to 5% monthly from the majority of lenders.
Why are payday loans a bad idea?
Many people view them negatively because a lot of them are created to keep you in a never-ending cycle of debt. It is crucial to pay off the debt completely within your payback terms because payday loans that are quicker and easier to get typically have larger rates. Payday loans are also not a long-term answer, rather, they are only a fast repair for an urgent situation that must be resolved almost immediately to avoid losing. They never actually make a difference in reducing long-term debt.
Alternatives to payday loans
Payday loans are made to keep you stuck in a debt cycle. When an emergency arises, it could seem like there is nothing more you can do if you have bad credit and no savings. But taking out a payday loan hurts your credit, any money you might have had and could even find you in legal trouble.
Our staff of qualified debt counsellors at Debtco Group are available to help you with any questions you may have regarding debt. We can assist you in taking back control of your financial situation if you feel as though debt is beginning to dictate your live.