General Drawbacks Of Payday Loans And Ways To Resist Them | Money In Minutes

GENERAL DRAWBACKS OF PAYDAY LOANS AND WAYS TO RESIST THEM As the month ends, the working class of people may find difficulty meeting their monthly expenses and may need money for the short term. Payday loans are usually small loans made targeting working-class people. These loans can be taken until the time your next salary pops in. So basically, they are short-term loans of tiny amounts with a very high-interest rate. The borrower is supposed to repay the loan within 7 to 60 days of a short period. Although these loans are so expensive, people rely upon these instant payday loans for the amenity it offers in case of the urgency of cash such as any medical emergency or any urgent trip abroad.

How do Payday loans in India work in case of unsuccessful repay?

We have already discussed that these small loans are lent at a very high-interest rate, ranging from 30-50% interest. In such conditions, when a person cannot repay the loan at the supposed time, most lenders comply with extending the repayment time limit but charge a rollover fee to the borrower. This usually leads the borrower to drown deep into the sea of debt for months or years as the charge keeps increasing and accumulating.

This being one of the severe disadvantages of a payday loan, let's see some other drawbacks and ways to avoid them.

1. Getting trapped by unauthorized lenders – Sometimes, people seek loan help from unauthorized lenders and borrow money from them to be their prey in the end. These unlicensed lenders do not follow state law and may impose a very high-interest rate on you to practice illegal debt collection in the future. You should stay alert of such lenders while borrowing payday loans. To avoid such traps, you should contact your state regulator and an authorized loan lender.

2. Not having enough knowledge – When willing to take a loan, some people don't care about calculating the Annual percentage rate according to the loan duration because a forthcoming visionary is essential while taking a loan.

Through the annual percentage rate, you can compare how expensive your interest rate is compared to the amount borrowed, and thus, you can be careful from the beginning itself before taking the loan. This pitfall can be avoided only by getting enough information and knowledge before going to take the loan.

3. Have you calculated the hidden fees?

By hidden fees, we mean the small amount of our money, which gets invested unknowingly in the form of various fees such as application fee, customer service fee, returned check fee, and an overdraft. When already in need, no one would want to pay this many fees only to get money with a large percentage of interest. So before you go further in taking the same-day payday loan, get all details related to the probable fees you would have to pay.

4. Considering payday loans as the first choice.

As already discussed, payday loans have a very high rate of interest, and thus, they can cost you a lot which you'll not realize when in need, but you'll most likely regret later. So, when you are in urgent need of money, don't directly rely upon these payday loans. Consider seeking out your friends and relative as the first choice and then go upon the payday loans.

5. Engaging through 'brokers' – Here brokers refer to a company or a website that does not lend the money directly to the borrower but instead, the borrower has to go through several companies or agencies to get the loan. This type of system makes you pay a kind of 'brokerage' without you even realizing it. So try to lean on such companies who lend you the money directly. You can also rely upon some high authorized websites that lend online payday loans.

6. Getting stuck in an eternal loop of debt –

The most hazardous outcome that a payday loan can result in is making you stuck in the middle of an eternal debt cycle. Borrowing money at a high interest rate in addition to rollover fees and other such things, a person can easily get entangled in this trap of debt. To avoid this, one has to be acknowledged about his capabilities that whether he could be able to pay the payday loan on time or not. He may even consider finding such lenders who do not impose rollover fees and can extend the repayment time when needed without the rollover fees. You should also be enough educated about loans before relying upon them to avoid future impacts.

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