Why Are Payday Loans So Expensive?

by GB Loan Financial Adviser
Facing short-term hiccup in your cash flows? Looking out for a quick and easy solution? Payday loans can be a perfect answer to your problem. These loans will let you to borrow small cash advance until you get next paid. But like any borrowing is a liability, payday loans also have risks and traps as all borrowed money comes at a cost. The cost of payday loan is quite high. Regardless of what lenders say, these loans are unbelievably expensive and can be used to over your short term urgent needs only and not suitable for your long-term financial goals.

What You Need To Know About Payday Loans?

If you have long term financial need, these loans are not suitable for you. The genuine reason to apply for a payday loan can be your short term cash flows to cope with emergencies. It is highly recommended to avoid taking up payday loans because of the high cost attached with them. Before jumping and applying for short term loans, you must explore alternatives for a Payday Loans.

How Payday Loans Work?

Well the most unfortunate reason why payday loans have a bad reputation is because many borrowers misuse or overuse them. As these loans are simple to apply and quick to approve, many people rely on them too much and use them for unnecessary reasons such as to go on a vacation or to buy things that you may not require at the moment. This is not what payday loans are supposed to be for. Payday loans are short term based loans, provided to meet small emergencies that cannot be avoided or postponed. Money obtained with a payday loans can be used to pay small unpredicted medical aid, to buy groceries, to handle utility bills or to pay any urgent expense. Overusing payday loans is another problem that salaried people may face as they generally gotten into situations where they have to roll over the loans because they cannot repay them within scheduled time.

How Much Does It Offer?

On gaining approval against payday loans at, one can borrow funds in between £100 to £1,000, repaid over a short tenure of two to four weeks. Funds will be automatically debited from your bank account on the day of your next payroll. They are short term based loans and thus lenders will charge them with a higher rate of interest. APR on these loans will also be higher. Use loan calculators available online to determine the interest on the amount of money you owe. The principal, number of days and the total repayment are the key terms necessary to perform the comparison between different payday lenders. Under these kinds of loans a borrower writes a check to a lender in exchange for a short-term cash loan. These loans are generally considered as short term agreement between lender and borrower on high interest charges. These loans are used to meet borrower’s sudden day to day expenses. These loans do not require any property valuation at the time of approval.

How Much Does It Cost?

It is important for you to know before that many state laws set a maximum amount for payday loan fees ranging from £10 to £30 for every £100 borrowed. A typical two-week payday loan with a £15 per £100 fee equates to an annual percentage rate (APR) of almost 400 percent.

What Are The Implications Of Non-Repayment Of The Loan?

In order to get full advantage of payday loans and want your experience with these loans as smooth as possible then you need to make sure to borrow an amount that you can repay back on time. Save yourself from putting into deeper debts by making timely repayment of the loan. Defaulting in payment will put negative mark on your credit profile and this will make future borrowing difficult for you. Penalties and late fee charges will be imposed by lenders if in case of missed or failed payment.

What Are The Dangers Of Payday Loans?

Extremely high interest rate is the biggest danger that these small loans have. The interest on these loans can destroy your finances. These loans give you the impression that they are indeed the only option available to handle emergencies. But a little research can help you find alternatives to payday loans. Just check them carefully and see if they are going to work in your favor.

What Are The Tips To Avoid Payday Loans?

Budget in advance: This could be the easiest solution to avoid financial problems. Set aside a part of your income every month for emergency expenses. Just open an emergency fund account and try to save an amount in every pay check that you get to cover unexpected expenses. It’s all about the dedication and discipline of creating a budget and sticking to it.

Work for more hours and ask for more money: By looking ways to increase your income, you will never short of funds at midst of the month and can face any sort of financial emergency with ease. Increase your income by working for longer hours. Ask the employer for extra income for extra working hours.

Find a part-time job: make bets use of your talent and get a part-time job to earn more money. Having an alternate source of income really does wonders for your finances.

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About GB Loan Innovator   Financial Adviser

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Joined APSense since, August 24th, 2016, From Uxbridge, United Kingdom.

Created on Nov 22nd 2019 02:49. Viewed 672 times.


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