Many people in the Louisville area are living paycheck to paycheck and do not realize how ill-prepared they are to handle financial emergencies and unexpected expenses. You may earn a decent wage now, but you have been known to occasionally use payday loans to help you meet some of your monthly obligations and unexpected expenses.
It is not unusual for individuals who are struggling to get by or who are low on cash to use payday loans to try to catch up or get ahead financially. However, such loans can sometimes lead to people facing further financial struggles. So, you may want to be cautious about payday loans and consider the following information about them.
High interest rates and fees
Payday loans may seem like a good resource to use when you are short on cash. Unfortunately, their high interest rates can make it hard for many good individuals such as yourself to pay them back without experiencing financial hardship. Most payday loan lenders charge more than 50 percent interest on cash loans. For example, if you take out a payday loan for $300 with a 50 percent interest rate, you will have to pay $150 more than the initial $300 you borrowed. There are also financing fees to consider.
Unfavorable late payment fee penalties
Most payday lenders require access to borrowers’ bank accounts so they can debit them when it is time for repayment. If the money is not there at the time of the ACH attempts, the borrower could charged insufficient funds from their financial institutions and significant late fees from the lender.
It can creates a vicious cycle
Some payday loan borrowers are unable to repay what they borrowed from one lender, so they take another loan from another payday lender. Eventually, some of them find themselves so deep in debt that they ultimately turn to bankruptcy.
So, it can be important to think carefully when deciding whether to turn to things such as payday loans in response to a shortage of funds. Also, when payday loans lead to financial struggles, it can be key to be aware of what options you may have for responding to the situation. In some instances, filing for bankruptcy can help individuals find relief in the face of debt difficulties, such as struggles with payday loans.