We’ve all been there – you need to spend money on something today, but you don’t get paid until the end of the week. The expense is pretty big, like a car repair or a bill payment, and you just don’t have the money to pay for it yet. If this has happened to you, you have probably looked for a place to borrow money from. During this search you may have come across something called Payday Loans, which are specifically designed for purposes like this.
With a payday loan you borrow money and then repay it, with interest, on your next pay day. The idea is to help you get by until you get your paycheck, and then pay off your debt then. These loan amounts are relatively small compared to a larger loan you would get from a bank. They are also widely used by people with bad credit ratings who can’t get money out from a bank. While this type of loan may sound perfect to you, there are some things you should be aware of.
First, payday loans tend to have very high interest rates. Because they are over such a short period of time, and because lenders are giving them out to people with bad credit scores, these companies make their money by having high interest charges. If you decide to get a payday loan, make sure that you plan ahead. Know what your repayments are going to be and make sure that you properly budget them in. Failure to do this can lead you to falling behind in your payments, which will only end up costing you more money to pay off.
You should also be aware of what happens if you don’t pay off the loan on time. For starters, your already low credit score will most likely be lowered even further. Missed payments and money owed are big factors to your credit rating. Secondly, the longer you go without paying your debt back, the more interest you will collect on it. Some people fall so far behind that they end up needed to take out another loan just to pay off the first one. Lastly, in extreme cases, if you go a very long time without making payments, the lender may sue you to get their money. This will end up costing you legal fees on top of the money that you owe.
Payday loans are only recommended if you can plan ahead very well. Before you sign the contract, know exactly how much you are borrowing, how much you are going to need to pay back, and what the interest rate is. Plan this into your budget and make it a top priority. Failure to do so can have some pretty serious consequences for you down the road. There are also other types of bad credit loans out there you can consider, which have lower interest rates and give you more time to pay them back. If you can avoid getting a payday loan, that would probably be for the best. If they are your only option, then just make sure you have planned ahead and you should be okay.