Low Interest Payday Loans
As you can imagine, since there is really no such thing as low interest payday loans, people often get into a financial mess by taking out payday loans. The payday loan has to be repaid in full in a very short amount of time, usually two to four weeks. And since these are not low interest payday loans, there is an additional fee tacked on of around 10%.
Payday loans work like this; you provide the proof to the payday loan company of your identification, banking information, and employment history and then the payday loan company will determine how much money you can borrow. The amount will vary depending upon your income and could be anywhere from $50 to $1000.
The reason people are attracted to these types of payday loans is because there is no credit check and they get the cash money in just a matter of minutes. The problem with the payday loan is that it must be paid back in full, plus interest, on the date of your next payday, and since these are not low interest pay day loans, the fees add up alarmingly fast.
That is very difficult for someone who is in financial distress so what happens to a lot of people is that when payday comes and they pay back the loan, they don’t have any money left over so they have to take out another payday loan and it creates a vicious cycle that is hard to break out of. This happens in part because these are not low interest payday loans.
Legally, a payday loan cannot be renewed; it has to be paid off and then can be taken out again in 24 hours. But by taking it out again in 24 hours which many people are forced to do, it makes the interest on the loan skyrocket.
Remember, these are not low-interest payday loans. For example if you were to borrow $300, you may have to pay back $335 in two weeks. If that leaves you broke and you have to take out the loan again, you will pay back another $335 in two more weeks. So in the span of a month, you will have paid out $70 in interest on a $300 loan. That is an extra $70 taken from you that you couldn’t spare in the first place so the chances of you ever being able to escape the clutches of the payday loan cycle get slimmer as time goes by.
In essence, you wind up paying $70 per month for the privilege of borrowing that initial $300, until you are able to pay it off and walk away from the payday loan place for good.
For some people, payday loans can be a lifesaver, but only if they will be able to pay it off and still have money left over on payday. Since these are not low interest payday loans, for those in a serious financial bind, taking out a payday loan can leave them much worse off.