Payday Loans- Are They Really Bad For You?
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Payday loan lending companies might seem to be popping out everywhere and some people really do think that they are the best things ever. However, in reality, they are the outlet of the credit industry. As far as the reliable credit institutions are concerned, it is somewhat obvious that they are supplying a tangible need for the demands of the public; otherwise, they will not survive. Thus, if there are a number of consumers dealing with them, why does payday loans still considered as bad?
Well, payday loan companies defend their position by claiming that they are offering a service needed by many people. More o0ften than not, life throws unexpected problems for which people just need help with. Payday loans are helpful in a sense that, if you are into an emergency, like accident, car troubles or even medical urgency for which you need fast cash, they are there to assist you. It is fairly fast and easy to solve your problem in a matter of hours.
You can also imagine, there’s a family of five which only one income source. The mom stays at home and takes care of the kids, while the dad goes to work. They are debt-free, but barely make a go of it. Suddenly, the car breaks down and they need fast cash for the repairs. In such situations, a payday loan seems to be a salvation, so why do other people consider it bad?
The family now borrows about $500 and is charged with 17% interest on the loan every two weeks. Whenever they paid it back in just two weeks, they will pay $587. So, what’s so bad about this? Whenever they can’t pay the amount in two-week time, then they will be charged for another $80 in additional interest. With that, their loan of $500 will be repaid for a total of $675. This will then show how it can easily go out of control.
Presently, there areabout 20,000 lending companies in the United States, which makes it a lot easier for you to find and apply for a loan. When trying to find answers to questions why payday loans are bad, most of the people could see that they are simply taking advantage of people, especially when they are at times of crisis and in desperate need of help.
Since payday loans are famous for charging high rates of interest, they could give the entire industry a very bad impression from the very start. In comparison to the standard credit card companies charging an annual rate of about 32% interest, the two-week payday loan at about 17% interest generates an annual rate of interest of about 455%. The numbers could be somewhat staggering, adding proof to the fact that they are a bad financial decision from the first ever step.
If you need a payday loan, feel free to get one. However, if you really don’t need it that much or that there are still other ways to solve it, then you better do it.