What drives most people to payday loans is the fact that bills are normally paid at separate times. The predicament may be that your accounts may be lower than expected or an unexpected expense may occur, such as car repairs. Maybe your last pay was lower than expected due to sick days or bad weather that prevented you from working. As a result, you will spend a huge amount of money, forcing you to get a quick loan.
This was the case for Sarah Idara, a Nigerian student who was studying Computer Science in Denmark. She states “I had a student job on the side. There was a month I fell sick so I couldn’t go to work or school. I was forced to take a loan of 10.000 kr. (approx. 500k NGN). The interests were so high that it took me over a year to finish paying off the loan.”
Although sometimes you may have no other option than to take a quick loan, it’s good to know what you’re getting yourself into.
– A payday loan is a loan incurred to cover the next payment, hence the name. The companies that offer them often praise their services quickly and easily, creating the perfect way to make a profit, paying attention to the potential pitfalls and risks associated with this transaction.
– A payday loan allows you to borrow a certain amount, and then pay it by adding an additional commission after receiving the payment. The commission takes the form of interest and as such increases the amount of borrowed funds. Of course, another major disadvantage is that it increases over time.
– Many people who desperately need money, do not think much about the future, imagining that they can go through this bridge when they reach it. But when you put aside another part of your payment to repay the loan, you probably will stay short at the end of the month – which will lead to what is often called a payday loan or a trap. cycle
– The trap on the day of payment arises when you become dependent on this type of loan to pay off your way. For example, you can start lending to protect yourself until you get paid. When the payment arrives, you can count on a huge interest.
-At the same time, these institutions add extra fees for services and raise old rates for services other fees like medical bills are high, Banks and credit card companies charge significant fees for exceeding credit limits. Some even try to charge this fee if the interest rate exceeds the limit. The return and payment of the budget become more complicated when the fees can be hundreds of dollars.
– Credit companies ask responsible borrowers to simply use emergency services – instead of using them to cover daily expenses, they say that people come to them when an unforeseen problem arises, such as unexpected car repair or a high quarterly bill.
– Anyone who offers these loans is legally obliged to make sure that you know exactly what the contract is about. If you do not reveal any aspect of the loan you have taken, you may have grounds to terminate the contract.
– You must be disciplined and repaid in the next payment period. If you have reduced your ability to the extent that the payday loan is the best option, you should immediately study this discipline. The loan repayment contract is quite simple. You now borrow money and pay, as well as the next payment fee.
Then you must apply this discipline to your budget. You need to control your budgets to get the tools. You need to recover some unforeseen expenses and other savings in your balance sheet. Regarding balance sheet liabilities, you must reduce your credit card debt to be able to limit your credit lines to help you deal with short-term cash flow problems.
– The main complication is that banks are changing the limits of credit and credit cards. It is a complexity that uses one of the standard ways to solve short-term cash flow problems. Perhaps you have no savings, and now your old hopes are lifted.
It is better not to intervene in the risky world of payday loan and quick loans unless if you are already in a large debt, and the creditors are demanding for the payment instantly or an emergency situation arises such as an accident or a disease that cannot be postponed till monthly payment is done and you don’t have liquid cash in your bank account hence forcing you to get assistance of this payday loan and quick loan. There are many ways to get out of this trap like preserving some amount of your salary as contingency money to cater for emergencies and other unforeseen expenses.
We recommend checking out this video on personal finance, that will help reduce the need for a quick loan.