Sometimes you just don’t have enough cash in your account and your next payday is still weeks away. Maybe hours were reduced at work, or you’re facing unexpected car trouble or another bill. When your check can’t come fast enough it may seem easy to just take out a payday loan, but it could end up hurting you more than helping you. Here’s why:
High Interest
Payday loan businesses are quick to advertise that nearly anyone can get a loan regardless of credit, but these loans often have very high interest rates which are usually even higher than rates on credit cards and personal loans. Typical interest rates on credit cards are 14% – 17%. According to an article by CNBC the average interest rate of a payday loan in Michigan is 369%.
Costly Fees
If you take out a payday loan but fail to pay it back on time, you’ll be charged a fee ON TOP of that interest rate you already owe.
Overdrafts
Some payday loans request that you give access to your bank account in order to set up the initial loan. If you don’t pay on time, the company may try to withdraw what is owed from your account leaving you with an overdraft fee from your bank or credit union.
Cycle of Debt
Taking out a payday loan can get you stuck in a cycle of debt if you’re not able to pay off the initial loan on time. Your unpaid interest may capitalize, late fees may be added to your account, and your bank may be overdrawn. This makes it harder to get out of the debt and puts you in a vulnerable position where you need to take out more payday loans.
Being Affected by Payday Loan Debt? We May Be Able To Help
Need a personal loan to consolidate debt? Call us to get started today.