Payday loan stores seem to be ubiquitous, and some say this is the best thing ever, but in fact, for creditworthy credit institutions, they are tabloids in the credit industry. Obviously, they are meeting the real needs of the public, otherwise they will not survive. So, if so many consumers are free to choose to deal with them, why is the payday loan not good?
Perhaps the best way to illustrate this is to use our imagination to create real-life scenarios that many people face.
A payday loan company claims to be defending its position by providing the services many people need. Life often brings many unexpected problems that require your help. They asked why the payday loan is very poor. If you have a car accident or an emergency medical situation, do you need to cash it out now? This is an incredibly quick and easy way to solve the problem immediately. But for many people, this is also a way of nightmares that looks like a quicksand.
Suppose we have a family of five with only one source of income. Dad went to work, and my mother stayed at home and took care of three children. They have no debt, but they barely maintain it. Suddenly, the car broke down and they immediately needed money for mechanical repairs. In this case, payday loans look like their salvation, so why not?
The family borrowed $500 and was charged 17.5% of the loan interest every two weeks. If they pay off their debts within two weeks, they will owe $587.50. What is wrong with that? It is very likely that they will not have enough money to do this when they expire, because it is difficult to get that much money in just two weeks. At that time, they will charge an additional interest of $80.50. As a result, their $500 loan made them lose a total of $675. It's easy to see how this started to get out of hand.
Currently, there are more than 20,000 payday stores in the US, which makes it seem a little too easy to rely on them. In 2010 alone, the industry’s interest income exceeded $4 billion. When trying to answer the question of why payday loans are bad, most people will see that they are taking advantage of people's interests in times of crisis and urgently need help, rather than being attracted by high socks. Interest expense.
Another disadvantage of payday loans is that they do not reflect your good credit score. If you do not pay off your loan, your credit score will be compromised.
Since payday loans are notorious for charging astronomical interest rates, they have left a bad impression on the industry from the start. Compared with ordinary credit card companies that charge 32% per annum, the two-week payday loan has an interest rate of 17.5% and an annual interest rate of 45%. These numbers can be staggering, which proves from the fact that they were a bad financial decision from the start.
If you need a loan urgently, look for other possibilities. Please check with your local bank, your credit card institution, or even with friends or family members who may provide support.
If you still don't see why payday loans are so bad, then you can do some research online, find many stories, people fall into this vicious circle, wages are detained, and ultimately pay for incredibly small advances. Incredible numbers were urgently needed at the time.