4 Reasons to Avoid Payday Loans and How to Get Help

Payday loans are often seen as a quick and easy way to get cash, but they come with a high cost. Payday lenders charge expensive fees, and relying on fast cash can lead to a debt cycle. Trusting payday loans facilitates unhealthy financial behavior, and getting out of the cycle takes time, planning and dedication. The best way to get help is to look for alternatives to using payday lenders.

The types of credit you have count in terms of your credit rating, and a payday loan has a more negative impact than a car loan or major credit card. You may not see a big drop in your credit rating when you get a payday loan, but small dents can add up to big drops eventually. The average APR for credit cards is around 17.73%, while payday loans have interest rates as high as 911% for a one-week loan and 212% for a one-month loan. Payday lenders mainly deal with people who cannot get loans through mainstream channels, but even if they had charged interest, it would have been much lower than the rate charged at a payday loan location.

The simplicity of borrowing and easy access to cash make payday loans attractive to many consumers, but there are very good reasons to avoid them. For help improving your credit and finding alternatives to payday lenders, meet with a reputable nonprofit credit counseling agency that is a member of the National Foundation for Credit Counseling (NFCC). Payday loan stores are open longer than normal bank hours, allowing you to easily access cash regardless of the time of day. All you have to do is read the fine print, figure out the real cost of getting stuck in a payday loan cycle, and find some other way to survive until the next payday.

Even if your credit wasn't good before the payday loan default, a new collection action is almost certain to make it worse. If you write a check for later deposit and don't have enough funds to cover it when you arrive at the bank, both your bank and your payday lender will likely charge you fees for returned check. So, while payday loans seem easy to get, remember the old adage of 'If it seems too good to be true, it usually is'.