Just about everyone has received unexpected bills and expenses that have prompted him or her to seek money when they hadn’t planned on doing so. For the people who have money in the bank or good credit, unexpected expenses are no big deal, as these individuals can simply withdraw money from the bank or use a credit card. Unfortunately, though, not everyone has good credit or money in the bank, and for those who have the displeasure of having less-than-perfect credit, it can be pretty difficult for them to come up with the money to pay for an unexpected expense. This is why so many people in emergency situations turn to payday loans.
Payday loan companies are popping up at alarming rates around the United States. It’s easy to qualify for one of these types of loans, and all you have to do is have a source of income, even if it’s not from employment, and an active checking account in good standing. As long as you meet these requirements you’re automatically approved, with a few minor exceptions. Although payday loans can really be a big help in some situations, the interest rates on such loans can be sky-high, although the exact amount varies state-to-state. The way payday loans work is if you want to borrow two hundred dollars for an unexpected car repair, for instance, and your next payday is a week away, the company loans you the two hundred dollars and you write them a post-dated check for the amount you borrowed as well as the finance fee, which can be as much as fifty dollars, depending on where you live, as well as which company you choose. On your next payday the agency deposits your check and your loan is repaid.
It’s easy to see why payday loans aren’t such a good idea, but the fact that the interest rate is astronomical isn’t the only reason it’s not a good idea to get involved with a payday loan company. If you’re living paycheck to paycheck like most people who borrow money from payday loan companies, it often becomes difficult to pay the loan back when you expect. Living paycheck to paycheck means that your paycheck is already accounted for, even before your actual payday arrives. Your regular bills and other financial obligations will come due on that date, often leaving little left to pay off a pricey and unexpected loan. This almost always causes those in such a situation to “re-advance.” Re-advancing is when you only pay the fee and borrow the original amount a second time, and by doing so you agree to pay an additional fee along with the amount of the loan on your next payday. If you re-advance ten times, the payday loan agency will have made five hundred dollars if the charge is fifty dollars, which certainly isn’t a good thing for people already experiencing financial troubles.
Due to the fact that it’s so easy to get approved for payday loans, many borrowers find themselves applying for loans with more than one agency. This situation really becomes serious when this happens, because things can quickly spiral out of control, causing a major financial disaster. Many borrowers have had to default on their various loans because the fees became such a burden that they could no longer continue to pay the loan fees without sacrificing their mortgage, utility bills, groceries, etc. Many states have now made it a law that you may only have two payday loans at a time. Most payday loan agencies will check your information with other databases to ensure that you don’t have other payday loans. Unfortunately this doesn’t include the various private payday loan agencies that don’t access the same databases that the larger agencies do. This makes it easy for consumers to continue to obtain loans from various agencies simultaneously, putting them at risk of overloading themselves.
If you are in a financial bind and are tempted to apply for a payday loan, it’s probably wise to think again. Perhaps you could borrow the needed cash from a friend or relative. If for some reason you’re unable to borrow the money from someone, then you need to carefully access the situation. If you can put off the unexpected expense until your next payday, great, but if not and you can’t get the money some other way then only if absolutely necessary should you consider getting a payday loan. If you ultimately decide to apply for one, either online or in your neighborhood, you should ensure that you can comfortably pay it off in full on your next payday, and if not, you should reconsider the decision. It’s not worth the risk of getting into debt by getting involved with a payday loan agency.