Can Payday Loans Get You In Debt?
I am sure that if you ask different people this question, you would get a variety of answers. If you try reading press releases and news items on payday loans – both in the United Kingdom and the United States, it is likely that you will run across some sectors saying that payday loans will only get you in further debt. Then again, I am sure that you will also run across some ideas – like mine – which have a more objective view of the subject matter.
So can a payday loan really get you in debt? I would say, off the top of my head, that yes it does have that potential but only if you do not manage your finances properly. If you do (manage your finances properly) then a payday loan should not lead to further debt but instead help you out with your financial needs. Why is my stance like this? First of all, think about the purpose of a payday loan. Why do they exist?
Payday loans were conceptualized because there were (and are) a lot of people who meet sudden financial needs in between their paydays. For many of these people, there are not many other options available to them. They might not have the means to address these financial needs without having to wait for the next pay check to arrive. As such, payday loans were designed to meet these short term financial needs. That is why the processing times for payday loans are very short, especially when compared to the more traditional bank loans. Also, this is the reason behind the practice of having to pay off a payday loan within a short amount of time. This is usually anywhere from 2 weeks to 30 days – the span of time wherein the borrower can expect to get cash from his pay check.
Now, if a borrower makes use of payday loans occasionally to meet his urgent needs and then pay the payday loan off within the specified amount of time, I can’t really see a problem. He does have to pay off the whole amount plus a certain fee (usually higher than a traditional loan) but if he sticks to the agreement, then he should not be deeper in debt than when he first started off.
The problem arises when an individual becomes tempted by the ease and convenience of taking out a payday loan. He thinks that since it is easy to get cash by this means, maybe he should rely on a payday loan to get him through – all the time. Since payday loan lenders do not run credit checks, any person can take out more than one payday loan at a time. It is also up to him not to pay off the loan amount within the agreed amount of time – he just needs to pay off the additional charges.
This is where things get tough. Admittedly, payday loans carry with them high charges. If not managed properly – as in the scenarios described above – it will only be a short matter of time till the borrower realises that he has more debt than he can afford to pay. If he has several payday loans going on at the same time, or maybe he has one payday loan after the other, then he might have a hard time keeping up with the payments. This would also mean missed or late payments, making the charges escalate till they get out of hand. This is when payday loans can really get you in trouble.
The bottom line is for a person to deal with his finances wisely and use payday loans the way they were meant to be used.
