Payday loans are often attractive to most people. This is mainly because of the many advantages that are associated with them. In particular, most people tend to be attracted to the fact that payday loans are quite easy to process and the fact that they are not associated with any collateral. At a glance, these advantages may appear indispensable. However, the converse is quite true. Payday loans are associated with a lot of demerits as the passage will show. Perhaps you will not see the need to go after these loans after reading this passage.
Very high interest rates
If you want a loan with very high interest rates, then payday loans are the right ones for you. On the other hand, you may not have seen anything yet if you despise credit card loans for their high interest rates. As a matter of fact, payday loans can have interest rates which are as high as 900%! This may sound like a joke but it is quite true. With a payday loan, payment is done on a daily basis or based on the time framebetween processing and repaying the loan. You are bound to pay more if you pay back the loan after a lengthy period of time has elapsed. The interest rates will also be higher.
Hidden fees are quite common
Unlike most secured loans, payday loans are associated with many hidden fees. Although most payday loan providers will not tell you this, this is something that is often true. As a matter of fact, more than half of the payday loan providers out there charge hidden fees. Unfortunately, certain hidden fees may be very high. In some cases, the hidden fees can translate to a sum that is almost half the total amount of money that the borrower is required to pay back.
A cycle of debts is often common
Due to their high interest rates and hidden charges, payday loans often plunge people into a cycle of debts. This might not appear reasonable from the outset, but it is something that is common. You may find yourself applying for another payday loan to service your old payday loan. In the end, you will be required to always be on one payday loan for purposes of repayinganother. This cycle will continue for as long as you do nothing about it.