Payday loans can help you get through when you’re in a tight spot and can’t see a way out. They can be incredibly helpful in a financial emergency– but at the same time, there are some dangers that you might want to be aware of. In this guide, we’ve broken them down into three categories: cost, credit and consequences.
The main drawback when considering a payday loan or fast cash loan is likely their high cost.
Payday loans are often expensive, and that is why we recommend only using them for one-off emergencies. The result of high-fees can often see a payday loan only solving financial worries in the short-term, with money difficulties returning later on. As a result, you should only consider this type of loan if you have a steady income that will allow you to repay it. If you are not financially stable, a payday loan will not be the right help in your situation.
Payday loans have their benefits, including same-day cash and accepting poor credit, but also demand a much higher interest rate than other loans. After taking a payday loan, be prepared for your expenses to increase in order to meet monthly loan repayments. The best use of payday loans is in a one-off financial emergency. Whether you’re facing hospital bills, emergency home repairs, or need to fix your car, a payday loan can help you obtain the funds you need. Filling out the short online form with Pheabs is the first step to securing same-day cash.
If you fail to meet a payday loan repayments, your credit rating may be affected. Bad credit means that you are less likely to be accepted for a loan in the future. A payday loan should never be used to repay other loans. This will create a cycle of debt with high fees that will be detrimental to your financial situation. If you have failed to meet payments on time, your loan continues to gather extra interest. You will likely amount a great deal of unmanageable debt which, if you do not repay, could end up marking your credit record. It may mean that you can no longer get credit products from traditional cash service resources.
Remember, a payday loan is not a long term financial solution! One should only use a payday loan to solve an unexpected and temporary problem. Payday loans can be helpful but should be treated as an emergency cash source to be used once or twice in your life. With Pheabs, you can also request 100% online without leaving the house, saving you valuable time, and getting the money you need into your account even quicker.
There are other severe consequences of defaulting on your payday loan that you should be aware of before enquiring. If you default on your payday loan, your lender may choose to enforce wage garnishment, lawsuits, and debt collection. While very rare, jail time is a possibility for failure to make repayments.
After the agreed repayments period has been breached, a lender will likely implement one or more of these actions to obtain any unpaid funds. They may begin automatic withdrawals from your bank account, which could cause extra bank fees for yourself. If this method doesn’t work, they could set up a process called wage garnishment. The process allows your employer to withhold a portion of your wages and send it directly to your lender.
If there is no alternative, a lender can take you to court for not paying back a payday loan. Keep this in mind when taking out a payday loan and think carefully about whether you’ll be able to afford the repayments. Lenders will bring small and large cases alike to court to get the money owed. While, in most cases, you do not need to worry about going to prison for failing to repay a loan, there have been cases where a judge enforces jail time.