Payment Trap: The Disadvantages of Payday Loans
It is quite tempting to rely on money lenders, especially if you’re out of luck and out of cash. While there are many loan variants out there, one that truly made its infamous mark is payday loans. The common misconception is that they are more straightforward than the other types of loans—a certain quality that gives it a false image of being “honest” and “trustworthy” over the other types. However, these do not really equate to the real nature of its payment structure.
There have been various complaints about this specific loan throughout the years, to the point that many U.S. states have implemented their own regulations against it.
What Are the Disadvantages of Payday Loans?
The recent complaints had revealed the fundamental nature of a payday loan structure. The way that it is implemented made it even more egregious, according to its many former borrowers.
If you aren’t aware of these flagrant practices and disadvantages, look no further than the following pointers.
It Is Easy to Borrow from a Payday Loan
This may seem like the opposite of a disadvantage; however, the reason why the application process is easy definitely gives away one of its main negativities.
The goal of a payday lender is to attract as many people as possible to its business. After which, they may ask unwary borrowers to sign their forms and agree to their terms and conditions. There is no other paperwork aside from that—so you can immediately receive the cash and spend it any way you’d like.
However, due to the lack of paperwork, the only party protected in the transaction are the lenders, not you! As a matter of fact, those small pieces of paperwork you’ve signed just trapped you within their payment terms, and there’s no turning back without a right of rescission.
It Is Difficult to Pay Off a Payday Loan’s Extreme Interest Rate
Think about this; credit cards would only charge you around 28% to 36% of its interest rate. On the other hand, a payday loan would charge you about 398%—and that’s undoubtedly a ridiculously high amount! This is the reason why many people struggle to pay off their payday loans, resorting to other payday lenders just to pay off their current debt. The cycle would continue until they could no longer pay any of their dues.
It Is Stressful to Interact with Their Terrible Debt Collectors
You would not be able to escape a payday loan, even if you no longer have any cash to pay it back. Payday lenders would hire ruthless debt collectors who would use threats and harassment to force you into paying your debt.
Remember, you’ve given them your contact numbers and address when you applied for the loan. This means that they know where you live, and they’ll definitely have no second thoughts in calling you during the early hours of the morning.
It Is Mandatory to Pay Off Your Debt in One Go
No, there are no installments when paying your payday loan debt. You are required to pay the borrowed amount, plus its interest in one go. This often results in the second pointer above, followed by the third pointer, with the debt collectors harassing you the whole time just to collect the total amount.
Payday loans are very risky to rely on. You are better off investing your time and effort on other types of same-day loans than this one. At least, for others, the interest rates are low, the debt can be paid in installments, and you will never have to deal with terrible debt collectors anymore! Sort out your options and be free from the grasp of a payday loan trap.
With all of that being said, if you are looking for online loans with monthly payments, look no further than Mid-Town Loans. We offer a variety of personal loan sizes to residents of Decherd—all free from hidden charges. Contact us for more information about our loans and services!