Major Drawbacks Of Payday Loans
Payday loans are considered to be one of the easiest ways to solve the financial problems of a person. However, if you examine the facts carefully, you will find out that this is not the reality. On the contrary, there are a large number of drawbacks associated with payday loans. One can benefit immensely by finding out everything possible before applying for the payday loan.
The first and the most major drawback of the payday loans is the enormously high rate of interest charged by the lenders or lending companies. This is the most important thing that should dissuade you from turning to payday loans to meet your expenses till the next payday. In the United States, many states have completely banned payday lending companies from putting forward loans to their residents due to their predatory rates of interest.
Some of the companies offer such high interest rates that they are often referred to as ‘loan sharks’. These lending companies make huge amounts of profits by offering high interest rates on loans to the needy and desperate people.
So why is it that payday loans continue to be so popular and people continue to take payday loans despite their soaring interest rates? The payday lending companies run various advertising campaigns which create the illusion that payday loans are extremely easy to obtain as well as equally simple to pay back. The companies announce that the only thing that is required to get the payday loan is a canceled check which will help them in getting your bank information and they can obtain their money back directly from your account. However, the advertisements never carry the high interest rates and lending fees that the borrower has to pay while paying back the loan amount.
The borrowers also have to face a lot of harassment in the event of non payment of the loan amount on the next payday. This is another important drawback of the payday loans. The lending company works out a payment plan at the time of finalizing the loan and makes it look quite convenient and reasonable. However, if you are unable to pay the amount on time, you will have to face various inconveniences such as constant phone calls at work as well as at home. Some companies even go to the extent of harassing borrowers by contacting their family members and neighbors.
Last but not the least, the largest drawback of payday loans is that payday loans are only temporary solution to a person’s financial problems. If left unplanned, they can only lead to more financial problems in the long term. For someone who lives from one paycheck to another, taking the help of a payday loan to meet a sudden expense will only lead to more woes than providing any help. You will only end up paying additional money to the lender or the lending company which will not be at all reasonable in case you face a repayment problem.
Therefore, it is extremely important to realize this fact and simultaneously find other alternatives to obtain the required cash in case of emergencies or sudden financial requirements so that you can avoid more serious financial problems in the future.