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Impact of Payday Loans on Your Finances

 

Stats reveal that at an average 25% of Americans manage their financial burden paycheck to paycheck. They have a limited amount to handle routine expenses and in case of emergencies there is no other option than taking a payday loan.

Impact of Payday Loans

In a scenario where expenses are increasing with each passing day, if your monthly finances are not well planned, you may end up taking several payday loans. Ultimately, it will exhaust your income in repayments, and heavy interest rates. The payday loans may seem a Life savior at the time of emergency, but soon they become a burden.

Those who are little confused about whether they should get payday loans or not are first advised to check its consequences and impact on your finances. Below we have highlighted a few such details to ease your decision-making process:

  • Smaller amount:

The payday loans are meant for providing financial help with a small amount. In many countries where payday loans are legal, the monthly cap may vary between $300 to $1000. Usually, the most preferred amount is $500.

  • Short term loan:

The payday loans are landed for a shorter duration. The borrowers are expected to pay back the entire amount when they receive next paycheck. In many countries, this duration is restricted to only 2 weeks, whereas in others, it can be extended to almost one month.

  • No installments:

The biggest trouble with payday loans is that they do not offer repayments via installments. Rather, you have to pay the entire amount along with the interest rate at once. This condition creates more financial burden for the next month. That is why most the people are not able to pay back these debts at once and they suffer more due to increasing interest rates.

  • Higher interest rate:

When compared to other types of loans, payday loans cause more financial burden due to higher interest rates. It is easier to maintain good credit scores with mortgage loans and even personal loans as well because they have low-interest rates. But when you take payday loans, it becomes almost impossible to pay back with limited monthly income.

  • Automatic repayments:

When you get a payday loan, you have no control over repayments. One needs to give a signed check or a few other documents in the form of security. Whenever you receive next paycheck, the amount will be automatically deducted from your account. It usually makes difficult for people to manage their expenses for the next month. If you are also in trouble due to payday loans, it is better to avail assistance for payday loan consolidation. There are so many banks and financial institutions that can help you to consolidate payday loans to avail payday loan relief. It is important to compare available offers for consolidating payday loans from different banks and choose the one with the lowest interest rate. Debt consolidation can help you maintain your monthly expenses with ease. Soon you will be able to enjoy more financial freedom.