There are so many financial institutions today that are offering emergency loans, and since the situation calls for something immediate, the lenders can provide you with the loan on the same day, in a matter of minutes.
But since there are many who are dependent on a paycheck to paycheck, it would sometimes be difficult for them to pay the entire loan all at once, thus they end up paying high interest rates. That’s why you choose the right lender who understands your needs by not giving you way too high interest.
This amount grows continuously from a debt of a few hundred dollars because borrowers will continually roll over their loans into new ones, therefore, making it difficult to pay up. Payday loans may seem like an easy way out of an emergency, but the sad reality is that they are debt traps that are so difficult to get out of.
The charitable trust estimates that almost 12 million Americans are payday borrowers and spend $9 billion as loan fees. The number one reason why many people depend on these loans is their credit score.
Most payday lenders don’t perform credit checks to check whether an individual has good credit or a bad credit score, they will still get funding. People with no savings have also led to the increased popularity of emergency loans. According to a 2016 survey conducted by banking rates, 69% of American households live from paycheck to paycheck and have less than $1000 in an emergency fund.
They may have funds to sort out their daily expenses but when disaster strikes that need an emergency cash loan, they are forced to borrow. With bad credit and no savings, the only option would be a quick payday loan.
These loans are dangerous because of the high interest rate charged on them but they offer a quick solution when you are in a financial bind. People, however, use them for long-term financial solutions which is very expensive.
To get a cash advance, you will need an active and verifiable bank account, proof of income and contact details.
Most lenders have simplified their application processes and it takes less than 5 minutes to apply for a loan online. Once the loan applications have been reviewed, you’ll get a loan approval notification from the lender, and if you agree to their terms and conditions, the funds will be disbursed to your bank account on the same business day after signing the loan agreement form.
Lenders will use your income to gauge loan amounts you are eligible for. Several states have, however, put a curb on the maximum loan borrowers can borrow at $1000.
If an individual needs a loan of, say $500, he will write a post-dated check of the loan amount plus all the interest charged, and then deposit it with the lender. He will then get his loan instantly after approval. Later on payday, the lender will cash in the check and the loan will be fully repaid.
On face value, it looks easy and less costly, especially if you are in a hurry and need emergency cash, but payday loans are very expensive in the long run. Imagine a borrower who doesn’t have $500 to repair his/her car. This person goes for a payday loan which after two weeks, he will need to pay back the $575 (the loan plus interest)
The short repayment schedule does not make it easy for the borrower. On payday after catering for his bills, he is left with nothing to pay back the loan. He is then forced to take out another loan to pay back the interest while the principal still remains and continues to attract more interest. It then becomes an ongoing cycle that ends up costing the borrower even more.
Failure to pay back the loan could also lead to more penalties, threats from the lenders, and in some scenarios, the lender may take legal action against you.
It’s no secret that short-term emergency loans will leave borrowers in a cycle of debt that’s difficult to escape. It is, therefore, important to come up with strategies that’ll help you avoid them in the first place. The only way to avoid payday loans is to save for an emergency and build your credit history. The two strategies are difficult and take great sacrifice, but are worth it.
Having some money set aside for an emergency is a sure way of avoiding a cash advance. Make it a habit to save before spending. If you are on a tight budget, take up more side jobs to increase your income. A credit builder loan is also a good way of improving your credit.
Since we can never control when emergencies will pop up, it’s important to work with a trusted lender whose rates are affordable. We can connect you to direct loan lenders who will approve your loan requests instantly. Their loan programs are also flexible and tailored to your needs. Just fill out our loan application forms today and let us make your work easy.