Posts Tagged ‘borrowing from payday lenders’

Borrowing From Payday Lenders To Pay Off Other Debts

If you are going through financial hardship and are defaulting on your mortgage and car loan, there are plenty of ways to handle this situation efficiently and to bring things back to normal. But, borrowing cash advances from payday lenders is the worst financial decision that a person can ever make. Following is a brief rundown on the various aspects associated with it.

Instant Money, Which Must Be Repaid Within Just A Couple Of Weeks

The most attractive feature of cash advances from payday lenders is that the loan applications are approved quickly and you receive the much needed cash almost instantly. The money you borrow is usually transferred directly to your checking bank account (or in some cases saving bank account) within just twenty-four hours. Some lenders however may take up to four business days to make the transfer. Besides that, it will also depend on your bank that how much time they take to process the transfer. Though it is true that you can easily get access to the money thus borrowed and use that to make the payments toward other debts, it is very important for you to keep in mind that these cash advances are required to be paid back by the next pay day, which is just a couple of weeks away. Since you are already having difficulty in keeping up with your payments toward necessary debts, such as mortgage and car loan, it will require a miracle to ensure there is enough fund in your account on the next pay day to pay off these cash advances. Most consumers fail to do so and are gradually pushed deeper into a never-ending cycle of payday debt.

Easy To Qualify, But Requires You To Pay Extremely High Amounts Of Interest And Additional Finance Charges

Another feature that attracts consumers and encourages them to borrow cash advances from payday lenders is the very fact that the legibility criteria required to qualify for these small, short-term loans are very simple. Almost every US citizen who is at least eighteen years old can qualify for it; all they need is a decent employment record and a checking bank account. No credit checking is done, which means even if you have bad credit, it does not create any hurdle. Payday lenders do not care about how good or how bad your credit score is. They never look into your credit report. Some lenders even claim to do no verification at all, but most of them first verify the information provided by you, especially about your regular monthly income and employment. If you are having difficulty in borrowing a conventional loan because of bad credit, payday cash advances may look like the best financing option. But, it is very important for you to understand that these loans require you to pay back an extremely high amount of money. Borrowers generally have to repay over $150 for every $100 of loan they borrow for a 14-day period. Though almost every state now has specific laws to regulate payday lending, majority of states where payday lending is legal still allow lenders to charge a 3-digit APR, which usually ranges from 200% per annum to as high as 750% per annum. Besides that, lenders are also legally allowed to charge additional finance charges (such as processing fee), which again cost you a lot of money. So, the overall cost of payday loans is extremely high.

A Paperless, Hassle-Free Process, But These Loans Turn Out To Be Very Dangerous For Your Finances Once You Miss The Due Date

Another very important feature that is often advertised heavily about cash advances from payday lenders is that these loans do not require you to go through complex paperwork. In most cases, you just have to fill up a simple 2-minute application form online, which you can do right from the comfort and convenience of your home. Most lenders never ask you to fax any documents. Those who do only require you to send your 6-months bank statement and your pay slips for the last 3-4 months. Conventional loans on the other hand require you to follow a comparatively very complex procedure. But, here it is very important for you to understand that payday loans are designed in a way that tries to trap the borrowers into a vicious cycle of debt. Since you are already going through a sort of financial crisis and are having great difficulty in keeping up with your payments toward your existing debts and bills, you are very much likely to fail to repay the payday cash advance on its scheduled due date. Once you miss the due date, your lender offers you two options – you are asked to either borrow a new payday loan to pay off the existing one or your repayment period is extended by one more month. The extension in repayment period looks like a wonderful option, as it provides you more time to arrange the necessary fund to pay off the payday loan, but as a matter of fact, the extension actually increases your financial burden substantially. When you accept such extensions, you agree to pay additional interest (at the same high rate) for thirty more days. Various types of penalty charges and collection fees are charged additionally. If you calculable it thoroughly, you will be shocked to see that just a $300 of loan can actually cost you over $700 or even more if you accept just one extension.

Overall, as you can see, borrowing cash advances from payday lenders to pay off your existing debts seems like a very attractive option, but in reality, it is the worst financial choice one can ever make. There are plenty of risk factors involved with these loans. In fact, that is the reason why even the Federal Trade Commission of the United States of America has warned consumers against these types of lending programs. They have even termed these small, short-term loans as predatory lending programs. In short, you must avoid payday loans at all cost. If you are having difficulty in keeping up with your debt payments, a better way is to talk to your lenders and work out a more affordable repayment plan.

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