Payday Loan Risks

 

Risks Of Fast Cash Loans

Taking out a payday loan can seem like the perfect solution when you are in a financial emergency situation or there are immediate bills that are due and you are short on the funds to pay them. Payday loans have easy qualifying requirements and are usually approved within 24 hours or less, giving you access to immediate money. But there are definite risks involved.

Continued Debt

For many people, a financial emergency means that they are panicked and reaching for a quick solution without thinking about the consequences. Usually, they get into a fast cash loan without reading the loan disclosures and the terms of the loan. This can lead to greater difficulty when the time comes to pay the loan.
Unfortunately, often the results of jumping into a payday loan without thinking can lead to needing to take an extension on the loan when it becomes due, leading to higher interest rates and additional fees. Alternatively, you can choose to take out another short-term fast cash loan to bridge the gap between when the payday loan is due and the next payday. This can lead to a never-ending cycle of continued debt and inability to repay the loans.

High Interest Rates With Fast Cash Loans

Another risk with payday loans is that they have extremely high interest rates. It is not uncommon to see interest rates ranging from 300 to 900 percent APR on loans of $100 to $500. Higher loan amounts often result in even higher interest rates. As a result, you could end up finding yourself owing literally thousands of dollars on a short-term payday loans without even intending to get in the situation.
It is extremely important to understand the terms of the loan before you take out a payday loan. This includes understanding the interest rate and how it is calculated. The interest is usually due on or before the term of the payday loan is up for repayment. As a result, you could end up with another bill due before you even pay the bills that spurred the need for the payday loan in the first place.

Unscrupulous Payday Loan Lenders

Although the payday loan has very little regulation, there are good and legitimate fast cash loan companies on the market today. However, with the rampant growth of the industry there have also been significant reports of unsavory business practices. As a result, if you take out a payday loan from one of the companies you could find yourself even farther in debt and dealing with difficult collection attempts.
To avoid this potential problem, investigate a potential payday loan company with the Better Business Bureau (BBB). Find out if they are registered with the BBB and if there have been any negative complaints against them in the recent past.
There are certainly potential risks involved in taking out a payday loan. If you have a need for immediate cash and a financial emergency, you might consider taking out a short-term payday loan as a solution. Before you do so, however, think about the risks involved in payday loans.