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WHY DO PEOPLE TAKE PAYDAY LOANS?


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WHAT IS PAY DAY LOAN?

a payday loan is a short term unsecure loan, for example you are having trouble paying your rent on time and you decide to take out a cash advance and you make it through for another two weeks, you might think that your problem is solved, but that is not entirely true because payday loans are different from other kinds of loans because you don’t get to pay them back over time instead you have to pay them back all at once.

HOW DOES PAYDAY LOAN WORK?

For instance, you need a loan immediately and you can’t get it from your bank, and your credit card maxed out and you end up going to a payday lender to get $400 in cash you will have to write them a cheque of $475,$400 is the loan and $75 is the fee you have to pay for taking the loan, if you don’t have the money in your account right then the lender will hold the cheque for two weeks until the loan is due, but after two weeks if you still don’t have enough money to payback the loan you will have to pay the lender an extra $75 to roll over your loan, which means that you will get two more weeks to repay your loan, and if two weeks later the same thing happens you have to pay another $75 which will buy you another two weeks to pay back the loan, so it takes you three months to save up enough to pay the original $400 loan, in the end you have paid $925 when you only needed $400.

WHY DO PEOPLE TAKE PAYDAY LOANS?

Most of the people take out payday loans to cover routine expenses, living pay cheque to pay cheque isn’t easy sometimes people look for quick fixes to relive the stress, the process seems simple and quick but if you don’t cover the unforeseen for example losing you job or falling sick you can just get sucked in to a downward spiral of ever increasing debt, because with an annual rate of 300 percent the problem only gets worse, rarely borrows manage to keep this loan short term.

WHY IS IT A MEANS OF FINANCIAL MANUPILATION?

The term flipping is associated with the payday loans, which means repeatedly taking out more loan to pay off the initial loan, lenders use high end commercials and bank like store fronts to entice people into borrowing money at triple digit interest rates. The average initial loan being flipped is eight times, it is an intentional death trap marketed to trap the financially unsophisticated, so that they can lock them into something they cannot pay back.

Taking out a payday loan is not something uncommon and its not difficult to see why people are drawn to payday loans they look like short term loans with a fixed fee but they are not ,unlike other types of loans you have to pay them all at once, which is hard to do especially for a person who is struggling to make ends meet and if you buy more time typically borrowers end up carrying a short term two week loan to over half a year, borrowers should be allowed to make smaller payments over more time, because these loans can take about one third of a buyers pay cheque which is just too much.

The lending business is huge with companies listed in the stock exchange and the industry claims that it provides a service that the banks are not interested in delivering, but the system encourages dependency and ends up sucking people into multiple loans.

If you have any queries related to payday loans please visit baltimorepostexaminer.com for more information on how you can manage debt and educate yourself on how not you fall for this interest trap.


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