Why Payday Loans Must Be Avoided By You At All Costs
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Sometimes, a financial emergency can come out of nowhere and leave one in a panic. It could be a sick pet, essential auto repairs or another pressing need that often necessitates immediate financial aid.
Nevertheless, for your own financial wellness, the most excellent thing to do when you find yourself in such an emergency is completely shun payday loans. The following are reasons why.
Expensive Fees
Payday loans have very high fees and interest rates. Often times this means they cost way more than personal loans or credit cards do. For example, in Canada the rates on a payday loan range from $15 to $19 per every $100 borrowed. Meaning once you take out a loan worth $500 you would have paid these lenders $75 translating into APR 391.07% which is greater than what most credit cards of high interest charge.
Many borrowers are unable to return the loan within the short payback time even if it were possible for them to manage it. Thus, they renew the loan, pay additional charges with interests and get locked up in debt cycle.
Cycle of Debt
The intention of payday loans is usually for short term; however frequently they develop into long-term debts quickly. Many borrowers roll over their loans because of hefty fees plus a short period to repay thereby accumulating further liabilities and spending more money on them. This becomes a vicious circle where you sink deeper by worsening your finance until breaking free becomes almost impossible.
Poor Financial Practices
While using these types of credits may sometimes seem like an instant solution however it normally leads to long-term difficulties financially speaking. Consistently relying on such advances fosters bad financial habits forcing individuals ultimately depend on expensive borrowing options as well as getting involved into other debt-related problems especially cash flow management rather than addressing core money management issues.
Other Choices
Remember these cheaper alternatives when faced with money constraint:
1. Talk to your Creditors: Reach out to your creditors and discuss extensions, payment plans or request for a reduction in interest rates. Most creditors will be ready to work with you if they see that you are serious about paying back your debts.
2. Ask for an Advance: Consider asking your employer for an advance on the salary if there is good rapport. No charges accompany this option though it may affect the next paycheck.
3. Borrow from Friends or Family: It may not be something one would like but borrowing from relations can be an inexpensive method of accessing funds. In order to avoid conflicts, ensure a clear plan of repayment is put down and communicate openly.
4. Take a Credit Card: A cash advance through a credit card which has available credit might be worth investigating if you have one. Although it’s still charged with interest, it’s often cheaper than using payday loans in most cases.
Closing Thoughts
Freeing oneself from payday loan debts takes patience, strategy and commitment to improve one’s financial habits. Understand why you got into this situation whether due to lack of money or overspending and take measures towards resolving the underlying issue at hand. Maybe opt for a long-term financial plan by seeking help from a financial adviser instead of slipping back into payday loan traps again.
In short, payday loans should only be considered as a last resort measure because they offer temporary solutions but come along way with much pressure on finances. Before settling on getting yourself such loan, explore other cheaper avenues that are achievable instead.
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