Why are Payday Loans So Dangerous? Some people think payday loans are the most important things on the planet. Reality says, these types of loans can create tons more trouble than they’re worth. Understanding the problems that can result from taking out a payday loan will make it easier to decide if this is something that you really want to do. Here are key facts to keep in mind.
High Interest Rates
While it’s true that many states have passed laws limiting the amount of interest a payday lender can charge. Notwithstanding those laws, there are some states that allow lenders to charge interest rates up to 700% Annually. the interest payments are significantly higher then the payment of principal. These are called predatory lenders. Worst of all their enabled by the states that they operate in.
Under dire circumstances and with no other options, it would still better to invest the time in securing a short-term loan from a local bank. While it may take longer to be approved, the interest rate will be considerably lower.
Additional Fees and Charges
There are often some additional fees bundled in with the total amount you have to repay. They are sometimes referred to as application fees, posting fees, or processing fees. Along with the usurious interest rates, you could end up paying the lender a fee for depositing the check which is payment for the actual loan.
The Collection Madness
If you can’t settle the loan according to the original terms, there is no sympathy from a payday loan lender. More then likely, your check will be presented for payment even if you’ve advised the lender that the money will not be in your account. At that point the bank will assess NSF charges, and the lender can begin collection upon check return.
There could be a barrage of calls at work and at home demanding immediate payment. These calls could put your job in jeopardy. Threatening letters will start showing up in the mail. The check could be turned over to the local back check unit operated by the local municipality. By the time this check is paid, that loan you took out to cover the repairs to the car will cost you a fortune.
Payday loans are not something to choose lightly. You need to look at all options for a pressing pressing obligation before choosing payday loans. In the long run, you’ll save money, avoid a lot of legal problems, and not have to be frightened every-time the phone rings or the mail arrives.