In the wake of the economic crisis in America, a lot of its people are opting for payday loans to tide over their temporary financial problems. Borrowers take help of short-term financing to attend to their immediate needs like paying off medical bills in case of a sudden accident or illness in family or for paying off various utility bills. However, these fast cash loans have some serious shortcomings that you should be aware of if you are thinking of getting one.
Short term financing- Demerits
1) Availability of Easy Money
One of the most significant features of payday loans is that they can be obtained very easily, without any conventional credit check involved. Thus, there are chances of borrowers getting addicted to them. Borrowers with low earnings find it difficult to obtain the traditional loans, owing to their poor financial situation. Therefore, they rely more on short-term financing that carries very high interest rates to tide over temporary problems. Fast cash loans with high interest rates only make matters worse for them as they are already reeling under financial hardship. So, it is advisable that you judge your requirement properly before borrowing. For instance, taking their aid to pay medical bills is understandable. But it is not prudent to consider this type of credit for funding a short pleasure trip, when you already are faced with economical hardships.
2) High Rates of Interest
As already mentioned, the no credit check payday loans carry very high rates of interest. Since these are high-risk loans (as they require no credit check and can be secured within 24 hours), they carry exorbitant APRs that can even touch the 1000% mark.
3) Serious consequences on failure of payment
It might be very easy to secure the online loans same day but in case you fail to repay them on time, you might face serious consequences. The creditor will probably charge you high penalty fees. If you do not pay off the debt within one month, then the interest rates will add up, whereby you might find that your total debt has spiraled out of your control. Therefore, take only that much of money that you think that you can repay.
As you are now aware of the demerits of short-term financing, it is important for you to exercise due prudence before and after securing it. Go through the tips mentioned below to know more.
Repay on time. Do not opt for a rollover as that may cost you dearly. Plan your budget properly so that you are able to manage the debt and other expenses at the same time.
Conduct due market research before taking these loans. Compare the rates offered by a few lenders to find out who is offering more affordable rates. However, if you discover that a particular lender is offering very low rates, then call the lender up to inquire about the hidden charges.
It would be advisable for you to consult a financial advisor if you are not clear about the features of short-term financing.
Author Bio: Sidney Terrell has been writing informative articles for well-known web portals on a regular basis. Loans, investments and equity markets are some of the significant topics that she writes about.