In today’s world, there are a lot of people that end up living paycheck to paycheck. With today’s cost of everyday living and with a low hourly wage, it is no surprise most people end up needing a little extra cash just to make it through. Whether it be the unexpected vehicle breaks down, or just needing cash to make it through the week, most people first turn to a payday loan. Here are some important things you need to know before getting one.
What are payday loans?
In the simplest term, a payday loan is an unsecured cash advance. They are normally in smaller amounts leading up to $500. In order to get one of these loans, you must also provide employment verification, such as a pay stub, and normally two forms of ID, and have a checking account. Normally, you will pay back the full amount you have borrowed on your next payday loans for bad credit. Always keep in mind that there is a repayment fee and taxes added on to the amount you must payback.
The downfalls of taking out a payday loan
One of the most obvious downfalls to getting out a payday loan is ending up in this continuous cycle of having to get a loan. The interest rate for a loan can be anywhere of up to 500%. With having only two weeks to pay back the loan, most people must get out another loan just to pay off the first loan they originally got.
Some places will offer you payment plans to repay the loan which would be a payment every two weeks until the full balance is paid off. Though that would sound better, it is worse than just paying the full amount off in the first two weeks. If you choose biweekly payments on a $500 loan, you will end up paying at least $1,000 back in total.
Alternatives to getting payday loans
There are a couple of other options you can choose from other than getting these types of loans. You will want to consider every option you have before choosing which one is best for you.
First, there are credit building loans available for people who have poor to no credit. These loans, just like payday loans, typically run between $500 to $1,000. They offer lower interest rates and typically have a payoff between 12 to 24 months.
Your second option is to start a savings account. Doing this will help put you in a better position and save you from getting yourself into debt when unexpected financial situations may occur. This is going to take some sacrifice to accomplish, but even as little as five dollars a paycheck can make a big difference when you need it.
Overall, you are going to have to make the decision that best fits your needs. If there happens to be an emergency and you need cash immediately, a payday loan is an immediate option. Just remember, and prepare yourself, that you will be paying back significantly more then what you have borrowed. If you can avoid this, try going with your bank for a personal credit-building loan, which may be a better option to help get you on the right financial path while helping you with some extra cash that may be needed.