Top 5 Reasons to Avoid Payday Loans at All Costs
You have no doubt seen the advertisements on television for quick and easy payday loans. All you have to do is write a post-dated check for the amount you want (plus their fee) and you can walk out with your cash. Sounds pretty simple, right? Well, not exactly. These services cater to people who need cash fast for one reason or another, generally to pay for unexpected bills or catch up on payments they’ve gotten behind on. So you get an advance on your paycheck, for what seems to be a relatively small fee, and before you know it, you’re up to your eyeballs in debt for a loan that should only have cost you a few dollars. As with everything that revolves around money-lending, there is a catch. And here are a few of the reasons you should avoid payday loan businesses (and their nefarious hidden agenda).
1. Astronomical interest rates. For starters, most payday loans require that you pay an up-front fee that is generally about 20-25% of the amount you want to withdraw. You write a check for this amount as collateral and you have 15 days to pay it back. If your check clears at the post-date, no problem. Your transaction is done and you’ve only lost $20 for every hundred you borrowed (not great, but for a one-time deal, it could be worse). If, on the other hand, you default, you open yourself up to a world of additional fees that could add up to 50% for each month that you’re late, up to a cut-off amount of 520% of the original loan. It doesn’t sound possible, but it is.
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Tags: amount, astronomical interest, Check, easy payday loans, fee, money lending
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