No doubt about it, fast payday loans are convenient and becoming increasingly popular for people in times of financial stress. They will help you get through that rough spot between paydays when you just have to have that extra cash to pay that unexpected bill. But if not careful, these fast payday loans can become something you rely on to make to your next payday. You can get wrapped up in an endless cycle of borrowing and repaying just to live day to day. Careful planning and budgeting is needed when one of these loans is used, so the repayment can be made as well as payment of the rest of your regular bills. Without this careful planning, it can become the main source of readily available cash-which is an expensive trap to fall into.
The idea behind fast payday loans is quite simple. The lender will loan you a percentage of your paycheck, which will be due at the arrival of your next paycheck (a few days to a few weeks). Due to the short-term basis of these loans, lenders charge very high interest rates-anywhere from 400 to 800 per cent annually. They also charge fees to process the loan-which can be quite high since they are charging for the speediness of the loan and they are trying to make a profit-they lose money in interest due to the shortness of the loan. Even with these high interest rates and fees, the idea of a cash advance on one's paycheck is just to hard to pass up-especially when in an emergency situation-financially.
Upon entering into a contract with a lending company for a payday loan, it is expected that the full amount will be repaid at the time of your next paycheck. People that carefully plan and budget will pay off the loan and still have money to pay for their other regular monthly expenses. Those that do not only end up paying back part of the loan and extending out the balance-usually with additional fees and interest rates. This continues to grow and what started out, as a simple payday loan becomes something complex. The lender may even be able to get what is due to them from your next paycheck-leaving you once again short on cash. This then keeps you in that terrible cycle of dependency.
The one thing that everyone can do to help avoid this cycle is to sit down and make a budget and figure out exactly what you may need to borrow and how the repayment of it will affect your next paycheck. You may surprise yourself and find that by cutting back on a few unnecessary expenses, you may not have to borrow as much as you originally thought. There may, in fact, be other options that present themselves once you sit down and look at everything on paper. Don't be hasty in a decision to borrow-always know all your options and determine the best thing for you and your situation before making a move that will put you in an endless cycle of borrowing. Even if you do have to borrow, budget carefully and you should be just fine-just don't make it a habit.