How to Get Into Debt Fast
“Yeah, right,” you’re thinking. Who’d want to get into debt fast? Well, thousands of people go to payday lenders every month and do exactly that. They have an emergency need for cash, and don’t know where to turn. All those television ads and radio commercials made it sound easy – and it is – easy to get into debt, that is.
Payday loans are small, short-term personal loans usually secured by a post-dated check or ACH withdrawal from a personal checking account. All that’s needed in most cases is a copy of your most recent paystub, and you can get payday loans fast either in person or online.
Although they are often marketed as a cash advance, payday loans are not as simple as that. If you got a cash advance directly from your employer, for example (something that almost never happens anymore, unless you are lucky enough to work for a friend or family member) he or she would simply pay you a little bit early. There would be nothing to pay back, because it’s money you’ve already earned, or will earn.
With a payday loan, you’ll have to pay back the original loan amount, plus interest. “That sounds reasonable enough,” you’re thinking. While it’s true that paying back the principal plus interest is the typical arrangement for a loan of any kind, the amount of interest you’ll pay on payday loans is far higher than what you’d expect to see for any other type of lending, even high interest credit cards.
To make matters worse, most people who take out one payday loan usually end up renewing it many times, on average for about six months. In the end the interest they will have paid is often more than the original loan amount, and the costs have set them back considerably from their original financial position.
So why are people still taking out payday loans? The answer may not be simple, and there are several reasons people are still using payday loans.
The first reason is convenience. Payday lenders are spreading through neighborhoods and setting up shop right next to grocery stores, convenience stores, and liquor stores. They have longer hours than other financial institutions, and they are readily accessible online at any hour of the day.
The other reasons that payday lenders have been so successful are less clear. Many people think they don’t have good enough credit to qualify for a lower interest personal loan from a traditional lender, even in some cases when they might be eligible for a traditional loan. In addition, most people believe they will be able to pay back the loan right away, that they’ll avoid getting sucked into the cycle of debt that has made payday lenders so successful. No one wants to think it will happen to them.
As with any loan, be cautious and always read the fine print. Examine the alternatives before you take out a payday loan.