Payday loans may appear to be a lifesaver when you need money fast, but the high fees and short repayment terms can trap you in a debt cycle.

What is a Payday Loan?

Payday loans are short-term loans available for either a few days or a few weeks to cover the money you need to pay bills or pay for something important. Usually, they’re available in low-dollar amounts, with few restrictions on the terms you can take. They allow you to pay for a short period, typically with just a few days’ pay from a job. How Do Payday Loans Work? Payday loans may have different terms depending on how long they’re for. For example, a two-week payday loan will give you the money you need to make due but will require you to pay it back in full in the same amount of time. These loans also come with high-interest rates. Payday loans are usually an option if you can’t wait for your next paycheck.

Why do People Take out a Payday Loan?

Getting a payday loan is often the last resort for people who can’t get access to traditional banking options. According to a Pew Research Center study, more than a quarter of payday loan borrowers describe themselves as having been turned down by traditional banks before borrowing from a payday loan company. “Many people don’t know they’re eligible for credit,” says David Weliver, the founder and president of the non-profit Financial Health Partners. “They end up in this cycle of short-term loans and interest rates go up and up and up.” The Pew Research study found that about 1 in 10 payday loan borrowers have been given a loan on credit, though.

Before applying for a payday loan, look at the specifics of the payday lender’s contract and what you’ll actually be charged. The CFPB recommends a full read-through of all the fees.

What do You Need to Know if You Get a Payday Loan?

Payday loans can seem like a lifesaver if you need cash quickly. However, the high fees and short repayment terms can lead to a cycle of debt that might even damage your credit. You can use our tips to avoid the pitfalls. There are no limits on how much you borrow. Make sure you know the costs and terms. Some lenders make you agree to repay the loan in full by the next day. If you can’t, you’ll be charged a late fee. You can’t get out of paying the loan if you miss a payment. There are no limits on how much you borrow. The cost depends on many factors, including your income, the amount of the loan, and the APR. Payday loan lenders sometimes charge a fee to approve your application. Even if it’s just a $10 fee, it could seriously damage your credit.

Conclusion

The amount of payday loans in circulation is steadily rising. No matter what, it is important to stay away from such loans, especially if you do not have the ability to repay the borrowed amount in full and on time. Do your research before choosing a payday lender. There are a number of online lenders that are easy to get the money you need without much inconvenience. You can choose one from your hometown or even find a lender who has branches in another country. Find the payday lender that suits your requirements. Always ensure that you pay on time. Credit history is important, even if you plan to get a credit card. There are companies that charge you a small fee if you default on your loans. As a customer, you should stay away from them.