Payday loans are
often used as a crutch by many people who can hardly manage their personal
finances properly. Often this 'crutch' can become a financial coffin that leads
to a debt flow that seems unending.
When used
properly and with caution, payday loans are a useful financial instrument that
can actually be a better choice than some other alternatives, such as late fees
and bounced check charges. However, many people end up taking out a payday loan
to prevent the aforementioned charges and do not pay the payday loan back as
promised. This causes the borrower to pay the high loan apr and the late fees
and bounced check charges, causing more financial hardship. It becomes a cycle
that is hard to break.
From an outsiders
point of view, this cycle may seem easy to avoid but for many people it is a
fact of life. The people who get caught in this trap usually have good
intentions as far as repaying the loan back on time but they often borrow more
than they can comfortably repay in such a short period of time. Often other
expenses are overlooked when they apply for the loan and once the money is in
their account it is too late, there will be an automatic withdrawal from the
chosen bank account in two to four weeks that can cause other checks not to
clear. And the cycle begins.
Once the borrower
fails to repay the payday loan on time, he will incur more charges on top of
the original amount and this new amount is due to be paid in full in another
two to four week period. If in this time frame, the bank account has not been
brought back up to a level to cover the payment the borrower faces more fees,
bank charges and other expenses. Often times, the borrower will be forced to
close the banking account to avoid any more bank fees associated with the
negative status of the account.
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