How Safe are Payday Loans?
The biggest question surrounding payday loans is how safe are they really. Many states have banned or tightly regulated them. What makes them so bad to need all of this regulation ñ the practices they have instilled in the lending. Payday loans are very predatory and aggressive. Once you get into the cycle, it is very hard to get out. They pressure you to sign knowing that once you do you cannot get out.
If you are very good with money and budgeting then you may be able to avoid the trap. Even then, most of the time people who are like this do not need to utilize payday loans in the first place. The first terms may not seem so bad when they are presented to you. $40 in fees and charges on a $300 loan doesnít seem too bad, right? Well, if you pay it off when itís due then it is not that bad ñ a bit high but understandable under the circumstances. If you roll the loan over to the following pay period you incur more finance charges, interest, and other hidden fees. This can add up quickly especially if you continue rolling it over as much as possible. Many people get trapped into payday loans as they see it as the only way to get out of the mess they got themselves into in the first place.
When it comes time to pay up many people can no longer afford the loan what started as a simple $300 with fees has turned into a much larger amount owed sometimes 3-5 times the original amount. Most lenders will not offer payment plans at that point ñ at least without more interest building up ñ and will try to draft your account. If the money is there and you had it allocated to other bills then you would be out of luck and if it is not there. You would be hit with overdraft fees, insufficient fund fees, and returned check fees from the bank and/or the lender. In some cases, payday lenders will use aggressive and predatory tactics to try to collect the debt. Not all lenders will be bad but the majority of them are.
Payday loans should be a last resort for anyone needing to find some quick cash for some reason or another. There are many other options out there that are much safer and more secure than payday loans. These types of loans may seem harmless but they are definitely not. There are many downsides to them that may not appear at first. It is important to remember to check with your spouse and discuss any type of lending decision. With a payday loan, once you sign on the dotted line there is no going back. You are trapped in the contractual obligations ñ even if you immediately returned the money, you would have to be the finance and administration fees. Some lenders are not as predatory as others but remember they are in this to make money not to help people in times of need.