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What are the risks involved with payday loans

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Taking up a payday loan is simple; it is like asking for normal loans but with different terms. With payday loans, you get the money almost instantly and the interest rates are imposed immediately you receive the money.  This type of loan is fast, convenient and requires minimal qualification. A payday loan may be one of your best options during a financial emergency, but has a high chance of creating a future financial crisis. Before you take up this loan, you should have a look at the following risks involved;

Taking loans to pay for other loans

Conventional loans may be harder to obtain; they take longer and require more qualifications. Payday loans are instant, easy and convenient to apply, and will require minimum qualifications. Since a payday loan is easy to obtain, you will find yourself taking up the loan to settle other loans.

The risk of a debt cycle

When you are fond of paying your loans using other loans, you risk creating a debt cycle. This cycle will automatically get you deeper into debts. This means you will not meet most of your loan deadlines and may use most of your income to settle some of your debts. This financial crisis may be difficult to come out of. So, before applying you need to make sure you will be able to repay your fixed amount. With PMLoans, you will know exactly what you are paying each month and there are no hidden fees at the end unless you are charged for late repayment. 

The risk of being scammed

When you register to a payday website, there is a high chance you may be providing your information to fraudulent lenders and scammers. People have created websites which they use to scam unsuspecting people. They collect your information and it for subscriptions and identity theft. Some scammers pose as your payday loan lenders and call may call you to demand payments. Fraudulent lenders have unlicensed payday websites where they impose excessive interest rates on loan borrowers. You should think twice and investigate before feeding your information to online webs.

Payday Loans

The risk for financial health

The risks involved in taking these loans are enough to cripple your financial health. For starters, the interest rates on payday loans are too high, especially for a short-term loan. Conventional loans are long term but they have cheaper interest rates. . When you don’t pay the loan on time, interest rates will increase until you pay it fully.

Repayment 

If you don’t pay your loans on time, your debt will appear on your bank statement and the lender may report this to the credit bureau depending on their terms.  Either way, the unpaid loans will appear on your credit card report as bad credit. With bad credits, it will be hard for you to receive traditional loans.  Insurance companies will charge you more and you may get fewer job opportunities if you have bad credit reports. The risks surrounding a payday loan are high, always avoid payday loan if you are not in any financial emergency.  If you take the loan, take measures to avoid the repercussions.

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Next Post: The Do’s and Don’ts of Payday Loans

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