The payday loan. Everyone has heard about them and they can seem like a simple solution to use when you need quick cash. When you are in an emergency situation, it may seem like there are no other options. The problem is that payday loans can be risky and lead to even more financial trouble if not paid off quickly and in full. Today we’re going to look at exactly why you should avoid these loans and choose an alternative.
High Levels of Interest
Payday loans have massive amount of interests that you have to pay back, which is on top of the charge for your actual loan. A lot of people who get a payday loan don’t entirely realize what they were getting into. In fact, a study was done that showed more than 50% of people who took out a payday loan weren’t sure whether the cost from a payday loan was more or less than the fees from a cash advance or outstanding balance on a credit card. The reality is that it can be hard to fathom the actual interest on a payday loan. Interest rates can be in the 100’s of percent, which is likely to dig you into a worse financial hole.
Ruined Credit Potential
Another study shows that 60% of Canadian respondents who were asked mentioned that if they had no credit card available, they would turn to a payday loan as an alternative. The problem here is that if you can’t pay the loan off properly, you’re going to be trying to catch up. When the interest is as high as it is, it can make it nearly impossible to pay off without seeking additional help. The farther behind you get, the worse of an effect it may have on your credit score. Rather than choosing a payday loan, it’s often better to work with 4 Pillars in Victoria to come up with a safer solution.
Making more informed financial decisions can ensure you avoid the problems related to payday loans. Looking at other options is nearly always the best choice you can make. If you aren’t sure what to do or where to turn with your finances, 4 Pillars in Victoria can help. You can learn more about our services by visiting www.4PillarsDebtConsultants.ca.