When you get into debt, it can feel like there’s no way out. You may feel like you’ll do anything to get out of debt, even if it might not be the smartest financial decision. Oftentimes, people look for an easy way out, or a band-aid fix for their debt. The unfortunate part is that these short-term fixes are never a good solution to debt, and often end up putting you in a worse spot than you were to begin with.
Many people who are burdened by debt think that payday loans are a reasonable solution to their debt problem. While they are relatively easy to get, they are not a long-term solution. In fact, they’re likely to cause more harm than good.
What is a payday loan?
Payday loans are short-term loans usually up to $1,500 that can help individuals get through a rough spot. They are called payday loans because typically, they are paid back on the next payday. Oftentimes, people use these types of loans to pay for things if they run out of money before their next paycheck.
Although it may seem like a great idea because these types of short-term loans can prevent you from falling behind in your debt payments, you’ll actually incur more debt through this method.
Payday loans are not cheap. In fact, the average payday loan costs $17 per $100 that you borrow, which equates to an annual interest rate of 442 per cent! If you fail to repay on the due date, then you may incur late payment fees and additional interest. It’s best to look for a payday loan alternative before even going down this route.
Payday lenders are private companies that only care about making money, and they know that the odds of you defaulting on their loan are high. Therefore, payday loans are not a debt solution because you may end up putting yourself in more debt – and a lot of it, especially if you don’t pay back your loan on time.
Many people are not well informed about payday loans so it’s best to understand exactly how payday loans work before taking one out. Many people often see it as extra money and don’t realize that they have to pay it back before their next paycheck. If you already have difficulty managing your money, you may even be tempted to spend this cash advance on things it was not originally intended for.
If you can’t pay your current debts, then it’s a bad idea to put yourself into more debt with a payday loan. Paydays loans can seem like great short-term solutions, but they can result in long-term problems. They are by no means a debt solution because they put people into deeper debt.
Rather than turning to payday loans, it is important to get to the bottom of your debt problems. Our certified credit counsellors can give you the resources and knowledge needed to reduce your debt the right way. Contact us today for a free consultation.