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Payday loans can be a vicious cycle…
Like so many American families living paycheck to paycheck that don’t have adequate savings or access to conventional credit cards, getting a payday loan for those “unexpected” expenses can become a real nightmare. Although it may seem like a good idea it really isn’t.
As anyone that has gotten caught up in this cycle can tell you, the main problem is that the money for your first payday loan is paid back by your next paycheck. That leaves you with less income and puts you behind on your usual expenses. So, it’s easy to see how people either go back to get another loan or renew their existing one. This not only keeps you in the hole but makes it very difficult to save money and break the cycle.
How about the costs? An annualized interest rate on a payday loan can actually add up to about 260 percent. For an example, if a person borrows $300 for two weeks, the average fee of $10 per $100 borrowed would pay $330 for the loan.
Now, $30 might not seem a lot and if it were a “one time thing” it really wouldn’t be a big deal. Take out a payday loan. Cover the unexpected expenses. Suck up the $30 fee and move on. However, studies have shown that the average payday loan customer actually takes out an average of 8 to13 payday loans a year. So at $300 with $30 fees, 8 loans work out to be about $240 in fees. Every two weeks the $300 is paid back or goes into rotation so at the end the total payback is $540, with almost half of that money being fees.
Payday loans are a good deal for payday loan companies. As always, to learn about your financial options and managing you debt log onto www.debtreliefoptions.com.
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