There is a pretty good chance that consumers have heard of a payday loan at some point. And, many have probably even thought about taking out one of these loans. The good news is that a payday loan is a great way to obtain a little bit of money when it is needed the most. However, it is vital to understand that this type of loan will not be a viable solution for all situations. Before taking out a payday loan, the consumer should first familiarize him or herself with the risks associated with this specific type of service. These risks will be explored in greater depth below.
Lots Of Online Scammers
First and foremost, consumers should understand that there are tons of scammers online and many of them prey on consumers that need money in a hurry. Some scammers have set up websites that pretend to offer payday loans. In reality, these scammers are only interested in obtaining the consumer’s private information, including their social security number and bank details. Before taking out this type of loan, it is absolutely pertinent to make sure that the consumer is actually dealing with a legitimate company. Research the company behind the website to ensure that they’re safe and will do their best to protect the consumer’s private information. Remember that in 2006, the most popular scams included check scams and loan scams.
Exceptionally High Interest Rates
Almost every payday loan out there will come with an exceptionally high interest rate. This is one of the main reasons that payday loans are often classified as high risk. In some cases, these loans can come with an interest rate as high as 300 or 400%. Just imagine the repercussions of missing a payment. If the borrower does not get the loan paid off in a speedy manner, the interest rate is going to come into play and it is going to hurt significantly. Just remember that it is possible to shop around and find better rates. There are statutes governing the activities of payday lenders from state to state. They may also impact the lender’s ability to use excessive high interest rates.
Borrowers Are Usually On Low Income
Another thing to remember is that many payday loan borrowers tend to be low income consumers. These individuals will primarily take out a payday loan, because they have run out of money and are broke until they receive their next paycheck. They may need to make a bill payment, but do not have the money to do so. At the time, the payday loan probably seems like a viable solution to their current problem. There is no doubt that a payday loan can be great for this type of situation. However, it is pertinent to take precautions to ensure that the loan is paid back on time.
Reliant On Your Future Income
It is absolutely essential to realize that the short-term debt is going to rely heavily on the consumer’s future income. The payday loan is designed to be a short-term solution and it is designed to be paid back as soon as the consumer receives their next paycheck. This can be a slight problem for some consumers. The future is always unpredictable. What happens if a payday loan is taken out, but the consumer loses their job before they get another check? They will not be able to pay back the loan and the debt will accumulate rapidly.
Other Expensive Fees
Believe it or not, the interest is not the only thing you must consider. In some cases, the consumer will also be hit with other expensive fees. Some of these fees will be hidden, until the bill is received. On average, a borrower will pay more than $500 in fees for payday loans. The consumer may not know what they’re going to pay, until it is too late. The good news is that some companies do not use hidden fees to boost their revenue. Swift Money is a great choice for people that need the loan, without any hidden fees. The payday loan is a big industry. It brings in roughly 10 billion dollars a year in the US. Much of this is generated through expensive fees.
Always Take Precautions
When it comes down to it, the consumer should always do everything in their power to protect themselves. It is vital to find a safe provider. Also, be sure that the company in question has a good history. Then, they should do whatever possible to guarantee that their bill is paid on time! Taking precautions can help to ensure that the client is protected from start to finish.