Millions of people with limited income and low credit scores opt for short-term payday loans to cover things when unexpected expenses emerge. This is because credit unions and banks are often hesitant to loan money from their institutions in these cases. Many outright refuse.
So what is the trade-off for this service? Higher interest rates.
Though a short-term payday loan could certainly save the day in the case of an emergency or unexpected bill, there are many people who are hesitant of them-and for good reason. These higher interest loans can contribute to a seemingly unending cycle of debt on the part of the borrower if not paid off in full, pretty much immediately.
There may come a time where obtaining a payday loan might cross your mind. But you shouldn’t leap to this decision. Even the smallest loan carries interest with it and the systems in which these loans are dispensed is something to be innately wary of.
How Predatory Lending Can Keep You In A Cycle of Loan Debt
If you have a lower income, an unexpected repair on the car or a short-term prescription needing to be filled can be difficult or even impossible to afford when the need comes up. This is where many opt for short-term payday loans, otherwise often known as installment loans, as a quick and nearly guaranteed solution. But many end up in worse financial straits than they were before taking the loan out in the first place.
The reason for this can be stated in two words: predatory lending.
Predatory lending is exploitative in nature, designed at its very core to deceive some of the most vulnerable among us. A predatory loan is issued to a person regardless of their ability to repay it to the lender, often affecting those who don’t know much about loans and personal finance.
Predatory lenders can typically be identified by who they market their services to. These unscrupulous financial institutions prey upon the elderly, the recently unemployed, those with less education and people who have poor credit. When such individuals fall into the debt trap of a predatory lending institution, it can be difficult and take years to crawl out of the accumulating interest.
To make sure that you avoid one of these lenders, keep the following in mind:
- Do they offer loans via email, telephone or even door-to-door solicitation?
- Do they guarantee that your loan will be approved before you even apply?
- Do they make you feel rushed as you sign the paperwork for your loan?
- Are the interest rates and other associated fees too high for you to pay?
- Do the documents for the loan contain unfilled, blank spaces?
If the answer to any of these questions is “yes,” you need to take your business elsewhere or even consider a different way of obtaining the cash you need.
Short-term payday loans might be a lifesaver in the event of an emergency, but anyone considering them should act with caution as they seek out an agency to help them out of their jam. There are many lenders that will gladly take advantage of someone who cannot fully repay their debt in a timely fashion, and they should be avoided at all costs. While there are others like www.paydaypixie.co.uk/ who will not take advantage of the loan seeker. Before you sign the paper promising repayment on a payday loan, it is always best that you get a knowledgeable friend-or even a lawyer-to look over the terms of the loan to ensure your safety and financial security.