Payday finance- The Endless Debt Cycle
These days most of us are up to our eyeballs in debt. I have managed to rack up a couple of credit cards by being particularly gullible and falling for Internet scams. So from time to time I have found myself in a situation where I cannot pay the rent, or buy the groceries. That is when I find myself logging in Cashdoctors or Paydaymate and asking for a reloan.
Most payday finance loan companies will loan you between $300 and $1000 without even doing a credit check. All they do is verify your employment by calling your employer. This seems great at the time, but the problem is they will loan to people who are in very bad debt and the payday loan will only make their debt worse.
The loan in paid out of your nest pay check and comes out by Direct Debit. If there is not enough money in your account you get charged a huge fee. The interest rates are incredible with a $300 loan costing $100, even if you pay it on time.
The main problem is when it comes to payday. What if nothing has changed, you still can’t pay the rent, but now you have the loan to pay back as well. The companies offer the choice of reloaning on the same day you pay it back. If your rent is due this may seem like your only option. This is how you get into a vicious debt cycle. Relying on a payday finance loan week after week is no good and if you don’t pay it your credit rating will suffer even more.
The best thing to do is to avoid these over priced loans at all costs. They may seem convenient at the time, but it can easily go wrong. Proper budgeting, even with a small income should stop you having to get a payday finance loan. Borrowing from a family member would be better if you know you can pay it back at least then you won’t get the fees.
