Dangers of Payday Loans

By | April 25, 2019

The most obvious problem with flash loans is their extremely high interest rate. The payment for a payday loan can vary from $ 10 to $ 30 per borrowed $ 100, which corresponds to an annual interest rate of 261% to 782%. But these loans also have other dangers that are less obvious.

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These dangers include:

    • Extension costs . When borrowers cannot pay back a payday loan on time, they renew the loan or take out a new loan. So even though they continue to make payments for their loans, the amount they owe is never smaller. A borrower who starts with a $ 400 loan and an interest payment of $ 60 and then continues to extend the loan every two weeks for four months will pay around $ 480 in interest – and will still owe the original $ 400.
    • Collections. In theory, a payday provider should never have trouble collecting a debt, because he can withdraw the money directly from your bank account. The problem is that if the bill is empty, the lender gets nothing – and you get a hefty bank fee. But the lender usually doesn’t stop with one attempt. It keeps trying to collect the money, so the payment is often divided into smaller amounts that are more likely to continue. And at the same time, the lender is bothering you with phone calls and letters from lawyers. If none of that works, the lender will probably sell your debt to a dollar collection agency. This agency can not only call and write to you, but can also sue you for the debt. If it wins,