The financial difficulties that we
all face are not small matters. These days, simply meeting our regular bills is
something of a challenge, and dealing with these commitments can drive some
people to desperate measures, such as taking out a payday loan for bad credit
management purposes.
In fact, getting a loan under such
terms is something of a knee-jerk reaction to counter mounting pressure.
Rarely, if ever, will such a move alleviate the problem, and often it leads to
a worse situation which prompts the borrower to opt for bankruptcy. It is
possible to avoid declaring bankruptcy completely.
But exactly why is a payday loan
such a bad option when it is arguably the most accessible loan type for bad
credit borrowers? Well, while they do have their uses, there other options to
consider that are more proactive solutions, and come with far less associated
pressure.
Why Payday Loans May Not Work
Taking out a payday loan for bad
credit management purposes can create more problems than it solves. For a
start, the interest rate that is typically charged on this kind of loan is
extremely high, ranging between 30% and 50%, depending on the lender.
What is more, the amount of time
that is given to clear the debt in full is extremely short, with as little as
14 days stipulated in some contracts. This is because the loan is granted
against an upcoming paycheck. And with so little time and such high interest,
pressure increases dramatically, so that in the long run, it becomes difficult
to avoid declaring bankruptcy.
Anyway, the size of a payday loan is
small. The maximum available is $1,500, which is enough to deal with a
financial emergency. And since full repayment ($1,950) is taken from a
paycheck, there is little left to deal with regular monthly obligations.
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