When people are in debt, it is not uncommon to look for loans or credit cards to help alleviate some of the daily financial stress. While there are times when this is a good move, certain types of borrowing will only make the situation worse.
Payday loans are something people often consider to get them through a rough patch but depending on your situation, this can do much more harm than good.
By nature, we are creatures of impulse. Financially speaking, this can be extremely dangerous.
We see that our check book is running close to a zero balance or in danger of going into the red and instead of cutting things back or doing without to get by, we merely look for a way to get more money to keep our lives status quo.
The payday loans business was built around our urge to get immediate satisfaction. This industry hides behind unusually high interest rates by having a very short payback term.
You borrow £3500 and pay them back £650 over three weeks, it does not seem all that bad…
If you were to stop and do the math, you would soon figure out that you were paying close to 1,000 percent interest!
Now, think about how damaging paying that kind of money can be when your budget is already tight! Sure, you got the £500 you needed this week, but now over the next three weeks you need to come up with an extra £50 per week just to keep things even.
Unless you are getting a weekly £50 raise or a big sale coming up on eBay, think twice before taking out that payday loan.
Payday loans have their time and place, but anyone already buried in debt should really consider other options before taking out a loan such as this.
Cut out some of the little things for the next few months, like your Friday night beer or cigarettes
Consider redoing your diet to eat healthy but inexpensively. You will be amazed at how much you can trim from the budget by doing this.
You have a much better chance of getting out of debt this way than you do in taking out a loan with a 1,000 percent interest rate.