Payday loan companies offer what seems like a promising opportunity. However, if you evaluate their services at a deeper level, you will see that there are some very negative aspects to payday loans. Payday loan companies can’t be trusted and we’re going to reveal the reasons why. It’s time that consumers like you understand the hard facts about payday loans and the reasons why they should be avoided like the plague.
Payday loan companies promote consecutive loans
A payday loan company will sometimes encourage their customers to take out consecutive loans! Any financial expert will tell you that the last thing you want to do when you are in debt is borrow more money. Payday loan companies will make it sound like a good thing and they will promote the positive benefits to it, without mentioning the considerable debt it will put you in. Payday loans are very high interest rate loans. The more borrowing you do the more interest you will pay and the deeper your debt will get.
Payday loans have terribly high interest rates
The interest rate that you pay is representative of how much the company is charging you on top of your loan. If you have a 20% APR, this means that over the course of a year (annual percentage rate), you will pay 20% in interest to the company. Payday loans are short-term, so it won’t take a year to repay the loan. However, most payday loan companies charge 200% interest or higher! That means your interest payments will accumulate quickly.
Payday loans are supposed to be short-term
A payday loan is supposed to be a short-term loan. However, some payday loan companies will allow you to extend your repayment date as long as you want. This is bad because the longer you extend repayment, the more interest you will pay. Any legitimate company would charge a fee for not making your payment on time. However, payday loan companies let you just keep going because they know their interest rate is so high, that it’s going to make them money.
Payday loan companies do not check your credit score!
You probably know by now that credit is how banks determine your eligibility for financing. Payday loan companies do not check your credit whatsoever. This is an immediate sign that you might be dealing with a company that is all about profit and not about secure financing. By not checking credit scores, they can work with customers that will undoubtedly not make their payments on time, and that just means more money for them. On the surface, it seems like a good thing, but it can be damaging to your finances.
Payday loans require immediate repayment
If you need a loan for anything serious, then a payday loan is not the answer. They require immediate repayment, meaning you have to have the loan paid off within 3-4 weeks after you begin borrowing. Most people need loans for purchases or debt repayment. A loan that has to be repaid quickly does them very little since it’s basically the same as paying all at once.
Author Bio: Stevie Clapton is a passionate blogger on everything and anything financial, you can find more of his articles all over the financial community.