How Quick Loans Can End Up Costing You Too Much

Oct 31

How Quick Loans Can End Up Costing You Too Much

Although quick loans might seem like an attractive option to those that are in need of short term cash, it is not always going to be the best decision financially. They are intended to be for those that are in a serious pinch and are looking for a way to get out of the situation by paying off old debts immediately, and taking on a new loan. It is easy to see why this can be a bad cycle to fall into, but that does not necessarily mean that quick loans do not have their benefits.

The Cycle

The payday loan cycle is one that many people fall into completely accidentally and end up having a very tough time getting away from, because of the nature of the loans. Payday loans give you access to small amounts (usually no more than $1000) of instant money, with the agreement that you will pay the loan back in a short amount of time, usually after your next paycheck. If you have debts that immediately need to get paid, such as a light bill to keep them from being shut off, then a payday loan might be the best option available to you in order to take care of required utilities. However, if you are unable to pay them back after your next paycheck, the interest rates can be unbearably high.

Most Payday loan services have interest rates higher than 100%, and often times as high as 175%. This, along with the penalties and fees that you likely will have to agree to in order to receive the loan, make it tough for some people to catch up with a loan. Then, they begin taking out other loans to start paying off previous unpaid loans, and get stuck in a cycle of using new loans to pay off old ones, which drains their own accounts over time as they pay the various fees and expenses. This is a common problem for those that hastily take loans that they cannot afford.

Alternatives

The best thing that you can do to keep yourself from falling into this situation is to have a solid understanding of the alternatives that exist that you are eligible for. To start, the best option is to see if there is a family member or very trusted friend who would not mind giving you a loan to help you out. Their repayment terms are not going to be strict, and they are not going to send you to collections if you run into some short term money problems. Of course, not everyone has family members with the means to help them in that way.

If you have young children in the family, there are communities and faith based programs that you can turn to and apply for if you are having temporary money troubles. This, along with personal loans with more favorable interest rates, advances in pay, and selling off expensive items that you have in your home are almost always better options than payday loans.

Author Bio: This article was written by Kenize Smith of PaydayAdvance.org a website with various information about payday loans.