Payday Loans

Pros And Cons Of Borrowing Cash Advance From A Payday Loan Lender To Pay Off An Existing Debt

There are some certain types of debts that are usually essential for the vast majority of people, such as mortgage and car loan. But, because of an array of reasons, many people often struggle with their monthly debt payments. In such cases, when the due date is close and they have no money to make the payments toward these essential debt accounts, they often start hunting for a payday loan lender so that they can borrow instant cash from them through a very easy, simple and hassle-free process. It is not like they are not aware of the high cost of payday lending; it is just that they do not think much about its consequences; they just consider it as an instant, temporary solution. The ‘attractive’ features of payday loans are advertised so aggressively that most consumers fail to look at the other side of the coin, which is full of bitterness and danger. Therefore, if you are also considering borrowing a payday cash advance so that you can keep up with your monthly payments on other existing debt accounts, you must take some time and review both the pros and cons of this approach. Following is a brief rundown on it.

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Disadvantages

If you want to make an informed decision on whether borrowing cash advance from a payday loan lender can be a good idea to arrange the extra cash you need to pay off an existing debt, you must first review the negative aspect of this strategy. It is an open secret that payday loans charge unusually very high interest, which usually ranges from 200% per annum to 600% per annum. Besides that, you are also charged a very high amount of additional fees in the name of processing charges and others. The loan is issued for a very short-period of time; in most cases, you have to repay within just a couple of weeks. For a cash advance of $100 borrowed for a small period of 14 days, you may have to pay back over $160. If you are borrowing $600, you will have to repay $960 after fourteen days. If you have borrowed for a much longer period, such as for twenty one days, you will have to repay $190 for every $100. These are just some general examples (not the exact figure) just to show you how expensive and risky these loans can be. This is because of the high cost of payday lending, why most borrowers usually fail to repay it in time.

Once you fail to repay a loan you owe to a payday loan lender, you find yourself in a very difficult situation because the other necessary debts, which you had borrowed the payday loan for in the first place, are still there and now there are additional financial obligations on you in the form of payday loan. The nonpayment of payday cash advance results immediately in hefty amount of penalty charges. Besides that, you are encouraged by payday lenders to borrow another cash advance (this time, a much bigger amount) so that you can pay off the exiting payday debt. You may again find it an easy solution, but if you go for it, you will eventually be pushing yourself into a vicious cycle of debt; that’s what happens with thousands of payday loan borrowers. In fact, even if you do not borrow another payday loan, most lenders have provisions in their loan contract that approves automatic rollover of your loan account once you fail to repay it on the set due date.

Advantages

There are no advantages of borrowing from a payday loan lender. There are obviously some very attractive and lucrative features of these short-term loans, but those features are not advantages. The eligibility criteria are simple. Lenders do not check your credit score. They issue you a loan even if you have bad credit. They do not require you to go through lots of paperwork. Often, no faxing of documents is required. In fact, some lenders even claim that they do not even do any verification; they simply issue a loan as soon as they receive your application (now, there is something really fishy about it; genuine lenders will never do that). The biggest attraction of payday loans is that your loan applications are approved instantly and you get the money you are borrowing within twenty-four hours. But, now that you are well aware of the risks associated with these loans, you can easily realize that payday lenders offer these attractive features just to trap you into a vicious cycle of debt so that they can keep on making money from you for a very long period of time.

So, What Should You Do To Pay Off An Existing Debt?

Missing payments on mortgage or car loan can definitely be very risky, as these are secured loans; if you fail to make the payment, you may end up losing your home or car to your lenders. Now that you have realized that borrowing money from a payday loan lender is a very risky option, you obviously have to look out for better alternatives. There are a few things that are very important for you to keep in mind in this regard. For example, mortgage lenders or auto loan lenders do not seize your home or car just because you have missed a couple of payments. In general, such things happen only when you have consistently failed to make any payment at all toward these debt accounts for at least six months. If it is the first time you are having difficulty in keeping up with the payments, just missing the payment is not going to bring any big trouble for you. You can simple miss the payment and then pay it back after a couple of months when you manage to arrange enough cash. It is obviously not a very smart strategy, but is a much better alternative to borrowing risky payday loans.

However, when it comes to avoiding loans from a payday loan lender and still be able to handle your existing debts efficiently, the best strategy is to talk to your lenders. Tell them that you are going through some sort of financial hardship and you are not able to make the payments as per the current repayment plan. The lenders are likely to offer you an array of solution for your problem. For example, you may be asked to make just the interest payments for a couple of months and then start making the regular payments once your finances get back on track. Alternatively, you also have an option to refinance. You can refinance your existing loans either with the same lender or with another lender.

In short, it should not be an exaggeration to say that when it comes borrowing a loan from a payday loan lender to pay off an existing debt, the advantages are temporary (it relieves you for a very short period of time) while the disadvantages are permanent (the additional financial burden it creates keeps on terrifying you for a very long time).


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