Nobody knows what will happen tomorrow and sometimes the future brings to us unpleasant surprises. Finding yourself in a situation of emergency money need is the most unwanted incident because it may lead to serious financial challenges if being inappropriately managed.
It is true that many people find a solution for significant financial hardship by taking payday cash advances, personal loans and by using some other kinds of a short-term financial help.
Pay day loan is considered as the most appropriate solution for the situations when people urgently need some amount of cash. Consumers are provided with money in order they could fix their emergencies.
Borrowed money should be returned with the next pay check. Of course certain amount of interest should also be returned. Such loans are available for many people and even for the individuals with low income or bad credit score.
But according to the results of the research made by Charity Trust many people use short-term money advances to cover current costs such as groceries, regular medical expenses, paying bills and utilities and other ordinary daily expenses. The situation is that many people fail to make on time repayment of a short-term cash advance ending with the huge amount of fees and charges added to their balances.
If the situation is not fixed by renewing the loan people are chased by collectors and their credit scores decline. This is the point where people get into the formidable debt cycle. What at first seemed harmless now turns into a nightmare.
Over 50% of Americans Get into the Payday Loan Debt Cycle
According to the results of the investigation which was made by the Consumer Financial Protection Bureau (CFPB) in spring of 2014 around 75% of pay day loans, including online pay day loans are prolonged or rolled over after expiring of the 14-days term when the loan should have been covered with the next paycheck.
And only 20% of borrowers succeed to cover the pay day loan without renewing it. It is also discovered that in some cases people have to pay much more then they primarily had taken from the lender.
Be Attentive not to Get into the Debt Cycle
Considering facts which are mentioned above it is very important to be attentive with using the service of short-term lenders. Here are some tips which will help you to stay away from the pay day loan debt cycle.
Consider taking pay day loans only in the extreme emergencies. Remember that it is better to properly design your budget rather than to pay huge amount of interest for the opportunity to pay bills. Make sure that you considered all possible options before applying for a loan.
- Make sure that you will be able to repay the loan without any difficulties. Remember that you may incur huge amount of fees when failing to make on time repayments.
- Borrow only from trustworthy and reputable lenders which provide you with the complete information concerning terms and fees.
Shop around to find less expensive credit option which may be suggested at the credit market. Peer-to-peer lending may be a good solution for you.