At present, the US economy is at the mercy of many conflicting factors, especially when you consider that poverty is going up as unemployment trends downwards. Although the rising cost of living is an influencing factor, this situation is made worse by the rising debt that the US owes. These circumstances are making it harder for employed persons to make ends meet.
Such people are resorting to short-term loans as a way of easing their financial burden. Payday loans are financial arrangements that can assist you in case of emergencies. However, you need to be careful when selecting a lender, because some are predatory.
One of the biggest problems that people have with payday loans is their exceptionally high levels of interest. The average person can end up paying an interest of up to 400 percent on a two-week loan of 100 dollars. With such extortionate rates, it is easy to be trapped in a needless cycle of debt.
If your reason for taking out a payday loan is to cover cash flow reduction, these rates of interest can only make things worse. To avoid such a scenario, you need to figure out what you need cash for and whether acquiring a short-term loan is the best option. Although payday loans can be helpful for settling living expenses and monthly bills, you might run the risk of defaulting payments.
The issue of interest is vital because it can fluctuate wildly in different states. Depending on the lender, interest rates start at 237 percent and move upwards. It is thus important to calculate the total amount repayable at the end of your agreement.
To avoid digging a hole for yourself, you should always read the fine print that is linked to your loan agreement. Doing so will tell you how much is due and when. This should help you to decide whether you can adhere to the agreement or not.
You should avoid using more than one lender when taking out payday loans. Firstly, you should only secure a loan against your paycheck because having more than one salary advance is illegal. Not only is it against the law, but borrowing from multiple lenders can leave you with an insurmountable debt.
Moreover, the sum of debt could exceed your salary, rendering you incapable of making the agreed payment in full. Similarly, securing a loan from a brand new company is unwise – borrowing money to pay an existing debt only puts you further in debt.
If you keep it up, you could end up with multiple loans acquired against the same collateral, which makes short-term loans a long-term problem.
Before you sign any contracts, you need to know as much as possible about your prospective lender. Because most businesses are taking their dealings online, you should look for social media pages and websites that belong to the lender. Doing so will allow you to glean as much information as possible about the lender online.
Does the lender increase interest rates without discussing it with his/her clients? You should know the answer to such questions before getting into a contract with any lender.
Do you have a bank account? If not, there are lenders who can give you payday loans with no bank account. You just need to find a lender who is willing to overlook that fact. Although payday loans are extremely useful in emergencies, it is your duty as the borrower to comprehend their nature and use them responsibly.