Payday Loans are basically, short term instant loans which can be obtained for a short duration by a borrower to cover his immediate expenses till his next payday. Since these are instant loans, they generally have a higher interest rate than the regular long term loan plans and are therefore, very expensive and advisably, should be paid back fully and on time within the borrower’s repayment period.
Payday Loans also known as Cash Advance Loans, Payday Loans lenders can at times inadequately inform the borrowers about all of the risks which they might face by applying for these Payday Loans. Some of these risks might be those of high rate of interests, high lender fees and other security risks like misuse of personal as well as financial information.
The fee charged by the Payday Loan lenders is high and ranges anywhere from $10 per $100 up to $50 per $100 borrowed. The loan amounts which a borrower can apply for usually lie in the range of $300 to $2000.
Payday Loan Risks
Payday Loans are a start to a vicious circle of debts.
The biggest risk of getting a Payday Loan is that it can tend to become a trap because there are chances that people might not use such loans as per one-time basis, which they initially planned it to be.
Most of the people who opt for these Payday Loans are generally the ones who are in urgent need of cash or those who have a bad credit history. For the ones who are in urgent need of cash generally do not have the time to get into details about the lender company policies and terms and conditions of loan plan. This lack of time and preoccupied attention of mind is what some fraud lenders take advantage of. They will hide the details like their fee, or the rate of interest on the loan and will just hand you over the loan money and telling you the date when you have to pay it back.
It’s only when you are over with that emergency expense and the payback date arrives, that you come to know that you have to payback a lot more than what you actually took as a loan. This can at times rob you off your next paycheck totally, leaving you bankrupt for the next month and with no other choice but to roll over the loan for a another 25 days or take a Payday Loan again to survive through the next month.
The bad credit borrowers who opt for Payday Loans are usually in desperate debt, but the high rate of interest of the loans make it difficult for many to pay back the loan amount along with the enormous fee. Because they cannot afford to pay back the loan, they often extend the loan by paying an extra rate of interest fee several times over. As a result, many of them end up paying far more money than what they initially borrowed. This kind of roll over situations put bad credit people in much worse economic shape than when they started.
Payday Loans have very high interest rates.
With such high rate of interest, the amount that you initially own as a loan is very less as compared to the total or gross amount that you have to payback on the repayment date or day.
With such high interest, the borrowers generally end up losing their entire next paycheck just to repay the existing loan and its high fee. And what’s more, at times, it has also been seen that borrowers have to take up another loan just to repay back the loan amount for their Payday Loan.
Beware of the unregulated Payday Loan Lenders.
While we have banks and other big financing institutes which are government regulated while lending money, there are also, several other small lending companies which may be unregulated by any federal firm. Regulation of these lending companies includes audit, examination, checking policies, and bonding.
Failing to payback can get you in trouble.
When you offer a post dated check to your lender, there are chances that it might bounce as you might not have so much money in your bank account to payback the loan including the lender fee.
Every unpaid or bounced loan check leads to a bounced check fees from the concerned bank as well as the lender. Also, bounced checks can cause a borrower a bad or negative credit rating on their credit reports. This can lead to the borrower losing his/ her bank account as well as an inability to open another account in some other bank.
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