Payday loans are a very expensive way to get the money you need, and you should not take one out unless you are sure you can pay it in full and on time. If a payday loan is not repaid on time, costs can become uncontrollable rather quickly. Failure to repay a payday loan can wipe out your bank account, and it can ruin your credit score. If you are considering getting a payday loan, here are some factors you should consider before you make a decision.

How A Payday Loan Works

A payday loan is a short-term loan that is meant to help a person make it until payday, and money is deposited directly into a borrower’s bank account. Typically, you must repay the loan amount plus interest by your next payday, but some lenders offer greater flexibility. On the deadline date, the lender directly debits your bank account for the entire amount, regardless of whether you needed the money for other bills. Payday loans have long lasting financial consequences, and failure to repay can make it difficult to obtain credit from short term loans bad credit later.

The Facts Of Payday Loans

A payday loan’s APR can be up to 1500%, as compared to the 18% average for credit cards. Payday lenders may not charge over 0.8% interest per day, which is a maximum of £24 per £100 over one month. If you pay late, you will be charged daily interest and a default fee as well. Under FCA rules, late fees cannot exceed £15, and you will never be liable for more than double the loan amount.

There are more consumer protections now than in years gone by, but even with safeguards in place, these loans are only manageable if you pay on time. Otherwise you can end up paying significant fees and interest. If you decide to roll over your loan because you can’t repay it, the lender must give you a pamphlet with information on debt assistance services.

Avoiding The Temptation Of Payday Loans

Rolling over a payday loan may seem as if it’s a good short-term solution, but it can leave you to pay significantly more fees and interest. The added expense can leave you searching for a way to pay for the essentials, such as rent, food and utilities. Before getting a payday loan, be sure to visit Moneyboat. to explore other options for short term loans first.