The Perils of Payday Loans
Payday loans can be a lifesaver when you need extra money to help cover a bill or when an unexpected emergency occurs. They are pretty easy to get, and while most payday loan companies deposit funds within a day, you can sometimes get the money you need the same day. You do have to supply verification documents like bank statements and pay-stubs, but the approval process is usually very quick. Once the money is deposited into your bank account, you need be well aware of when your payday loan becomes due to make sure you have the available funds to cover it. If for some reason you can't repay your loan on your due date, you can get an extension, but this is where things can take a turn for the worse.
You should never get a payday loan if you know that you can't pay it back. If you're living from paycheck to paycheck, then a payday loan will only add to your debt. And it will make it that much harder for you to keep current on any of your bills. A payday loan is meant to give you a quick surge of cash until your next paycheck comes. It shouldn't be a necessity that you need to survive. If you are experiencing financial difficulties, it won't help you to get a payday loan because it's only adding to your problem. A payday loan is just another bill that you don't need, especially if you can't handle the ones that you already have.
Another thing to remember is that payday loans are not meant to support your spending habits. Don't get a payday loan just to cover an unnecessary purchase. If you've got a credit card, use that instead; and if you've reached your credit limit, then you should be focused on paying down the debt that you already owe rather than trying to create more of it. Payday loans are meant to be used for emergency expenses not impulse buys. There's a big difference, and if you find yourself in this situation, you need to step back and take a good look at your finances.
If you do resort to a payday loan, you need to plan to pay it in full when it becomes due. The interest rates on payday loans are terribly high, and if you renew, your original fees are only compounded. You would think that you'd have to pay interest on just what you owe, but payday loans don't work that way. If you borrow $500, and you renew 3 times, you'll pay the same interest on that $500 no matter how far you pay the balance down. When you finally do get the loan paid back, you may have paid as much as your actual loan in interest fees, and that's just not good. It's a waste of money that you could spend paying down your other debts.
So what happens if you're unable to pay off your loan? Well, a few things happen. You'll be disqualified from receiving payday loans in the future, so you'll have to look for other alternatives in the event another financial emergency arises. You may damage your credit since most payday loans are considered an extension of credit, and they may send your defaulted account to collections. There's a chance that your checking account will be ruined in the process because of overdraft and non-sufficient funds fees that occur when they payday loan company tries to collect the money owed; that's additional debt that you obviously don't need, and if you can't pay them back, then your account will eventually be closed. So, there's another negative mark on your credit, and it could cause you to be denied a bank account in the future.
Payday loans can be extremely easy to get, and they can become a burden faster than you could think. If you're in a situation where you're short on funds, consider other alternative if at all possible. Maybe you've got a credit card that you could use, or you could borrow the money from a relative. Payday loans are a convenience, true enough, but if you can't pay it back on time, you run the risk of creating a pool of debt that might take you months or even years to clear up. Again, you should remember that payday loans are not a solution to your financial problems, but they can extend them. If you're having trouble budgeting for your expenses and managing your debts, then you probably have a lot more to worry about than just a payday loan. You might already be buried in debt and just refusing to accept the reality of your situation. Whatever the case may be, do yourself a favor and consult a credit counselor; let them help you figure things out and get your finances back on track.
