When you’re thinking of getting money to spend on expenses, short money loans such as payday loan or installment loan will often seem very tempting to take. They’re quick, easy, and you can even get your funds the same day you’re approved for that short money loans.
But what many amateurs don’t know is that these conveniences that come with short money loans do have a downfall to them and if you don’t know what they are and what do to with them, it can lead to potential financial downfall for you.
Why short money loans such as payday loans are bad
Most borrowers would use short money loans such as payday loans to borrow a few hundred bucks that needs to be paid within a couple of weeks. You might think it’s simply and easy at first, but the truth of the matter is that you’re getting little cash for a big headache down the line later when you have to repay it.
Because if you can’t repay it when it comes due, you’ll most likely be given the option to roll over or extend your loans. Don’t fall for this predatory trick. Why? Because these short money loans lenders are fully aware that if you’re late for your first payment, chances are you’ll be too for your second payment.
And you might not realize it at first, but the fees that comes with each roll over or extension rises bit by bit each time you do it. And since there’s no limit as to how many you can get for yourself, you can end up in a situation where you have to pay thousand grands for a loan that was supposed to only cost $800 or so.
Don’t fall for the no-credit-check ads
If you see a no credit check tag as a part of a short money loan advertisement, trash it immediately. There’s a reason most banks and lenders online require a credit check because it can give them safety that you’ll return the money, and in turn they’ll give you better rates since they know you’re someone that can be trusted.
If you were to take this out of the equation, there’s no safety on either sides whether it’s for borrowers, or lenders. As such, one can trick the others, and most time with short money loans, the one that get tricked are the borrowers.
Statistically speaking, most loans that advertise themselves as a no credit check loan have so much higher rates than others. Most of them also don’t report your on time payments on the chances that you’re actually able to pay off their stupidly high interest rates either.
So, you’re left with less cash because of the fees for that loan, and your credit score stays bad forever because they don’t report your due diligence to the appropriate credit bureaus.
Pitfalls of Short Money Loans
As we’ve mentioned above, short money loans such as payday loans have stupidly high interest rate. If you’re having a financial problem that requires money, getting short money loans will only worsen the problem and not fix the main root cause of it.
Your expenses will only go up instead of down. On rare instances where you need quick money, short money loans are fine, but don’t make a habit on relying on them. Especially on the situation we described above.
And that’s not to mention the possibility of getting yourself in trouble if things get out of hand. Bouncing checks that you write to your payday loans lenders can end up on your ChexSystems file and resulting in overdraft charges from your bank.
If this happens, banks and retailers may be unwilling to work with you any longer. Even your lenders can sue you or send your account to collections which again, will negatively impact your credit score to make sure that you’re dependent on their services.
Short Money Loans from Banks, are they Better?
As of right now, there are a lot of banks offering payday loans to their clients. And your bank is your trusted friend, right? So that means that getting a payday loans from them will be better, right?
Well, unfortunately for most borrowers out there, that is not simply the case. If anything, getting a short money loans the likes of payday or installment from banks are only making things worse compared to getting one from local payday loan stores.
And why is that? Well, it’s because banks have access to your checking accounts, and you have to agree to let them pull funds from your account to repay the loan. At the very least if you’re getting this type of loan from somewhere else, you can still have more control over how and when your money leave.
Short money loans and any short-term loans in general are not worth it most of the time. And instead of thinking of getting one yourself, consider other alternatives such as saving emergency funds starting now, start building your own credit history to get better loans, get a part time job, or others.
Doing these things will not only solve the situation where you need quick money, it will also help you to be more financially stable in the future as it’s always a good practice to have an emergency funds and another source of income just in case of emergency.
So, if you’re thinking of getting one, think again. There are tons of alternatives that’s available to you wherever you are. Patience is a virtue after all. We’re sure that it’s better to wait couple more days or week for regular loan instead of getting short money loan when they’re just a coin-flip whether you’ll be in-debt or not.
That’s all from us for now, thank you for taking the time out of your today for reading this article. We hope you find what’s written useful for your situation right now wherever you are, and we pray the best for your financial health. We’ll see you next time with another article to help you make better loans or financial decisions in your life. Bye!