The Payday Loan Debt Trap

Easy and quick availability of payday loans causes a nasty cycle of unending loan for borrowers.

Payday loans use your next paycheck as a security and are generally available for short term only, charging heavy rate of interest.  Though the money is transferred very quickly, at times the same day of applying for the loan or at the most within 24 hours of that, the lenders generally charge $15 for every $100 that you borrow.

The victims of payday loan companies are people desperately needing funds for emergencies like breaking down of car or medical treatment. If the loan is not repaid in time, the borrower falls into a debt trap. It is observed that the borrowers are required to take loan from the same company for an average of eight to thirteen times before they can really walk out of the debt cycle. Most payday loan companies offer to renew your loan up to three times if you pay just the finance charges for the loan.

Internet payday loan companies are quite dubious. The lenders misuse your personal bank details that you necessarily have to provide them while taking loan. Yes, there is an element of risk of fraud. Quite often, one comes across people complaining that despite their having paid all the dues, the lenders continued to debit their checking account.

Before opting for a payday loan, you should try other available options, like your credit union at work. It may be worthwhile checking with your bank to know if you can get an overdraft protection against your account. Perhaps, the best option will be to open a savings account and every time you get your paycheck, transfer a small convenient amount to that account to take care of emergencies situations requiring quick cash.

In case there is no option but to go for a payday loan provider, you must check with a couple of payday lenders to get the best offer.