Why you should stay away from payday loans
If you’re short on cash, you’re not alone. But before you take out a payday loan, let’s review what they are, why you should avoid them — and who you https://signaturetitleloans.com/payday-loans-sc/ can borrow money from instead.
What is a payday loan?
A payday loan is a short-term, unsecured loan that usually comes with a high interest rate. Most payday loans come in modest amounts — typically $500 or less.
With a traditional loan, you receive a lump sum and then start to make payments back over a set amount of time — from a few months to a few years — with a „reasonable“ rate of interest added on. With a payday loan, the full amount comes due all at once, including the interest and fees. With most, you’re required to write a postdated check for the full amount due — the loan, plus interest and fees — or give your lender permission to debit the money from your bank account on that date.
Interest rates for payday loans are much higher compared to traditional loans. A standard APR for a personal loan ranges from 6% to 36% — but may lenders offering payday loans charge annual rates of 100% or more, and some have been found to exceed 1,000% according to a 2013 ProPublica investigation. That noted, some states have limitations on interest and fees — and in some states, payday loans are altogether prohibited.
It’s also worth noting that payday loan lenders tend to target people who live in areas where poverty rates are high and income levels are low — as well as minorities and economically disadvantaged groups, who may have traditionally had greater difficulty qualifying for conventional loans, according to a study by the St.
Weiterlesen