Never use payday loans
Easy money is expensive.
Payday loans are one of the worst consumer debt traps today. The concept behind payday loans is simple, a lender will give you a loan based only upon your next paycheck. It’s an easy way to get money, but you’ll pay dearly for it.
Payday loans are the worst type of loan you can get. They often trap users into endless cycles of debt.
Why are payday loans so bad?
The interest rate — Interest rates on payday loans, typically amount to 15–30% of what you borrow. But don’t be fooled, that interest rate is for a one or two-week period. In terms of an annual interest rate, you’re looking at triple digits. One wonders how this is still legal!
The payback date — Payday loans aren’t installment loans. That means you have to pay the entire amount, including interest, the very next time you get paid. Basically, this means that you go from being broke to being broke again. Every paycheck.
What you can do instead…
Pawn Shops — Consider getting a much lower rate at a pawn shop. You’ll have a longer time to pay as well.
Credit cards — If you have credit cards, use those instead, and if you must, ask for a credit increase. Don’t be afraid to call up your company and tell them exactly what the money is for.
Family & friends — Some of your family and friends might be willing to help you out. It’s worth a try.
How can you avoid payday loans…
Set a budget — The average car repair bill is around $500-$600.[i] If you receive a regular paycheck then you can set aside just a small amount for a savings account. For example, if you are paid weekly and you set aside just $25, in just 6 months you’ll have that repair covered.
Get your credit in order — When you have a good credit score, even one that is considered ‘fair’, you’ll likely be able to get repairs financed. This will give you a loan that you can pay over a longer period of time instead of completely in your next paycheck.
Try to rethink the easy money offer. It’s never easy and it costs too much money.
Photo by Alexander Mils from Pexels
