The dangers of payday loans if you trust a novice lender

Payday loans can be dangerous if you lend from an unlicensed institution. It is a bear trap with money in the center, tempting a reaching hand. Since you have to pay off the payday loan in a short period of time (and with interest), paying it off quickly becomes a challenge. It is why you should trust a reputed lender that has flexible term and conditions. Red Payday is now a common name among the payday loan borrowers due to its flexibility, transparency, and market reputation.

What happens next?

When borrowers cannot pay these loans on time, they often end up transferring the entire loan amount (including interest and fees) to a new payday loan. About 80 percent of payday loans are renewed multiple times. This circle quickly becomes very expensive. In reality, many borrowers end up paying more money for the interest on their loan than for the full amount of the loan they initially borrowed.

What you should know about payday loans

Payday loans are available in small amounts, typically between $ 50 and $ 1500. If you need a larger loan, a personal loan may better serve your needs. These loans are called payday loans because you are normally expected to pay them off in full, the next day you pay. For most people this means a quick payment in two to four weeks, which is a short time to pay off a loan.

High interest rates and expensive fees

Payday loans come with high interest rates and expensive fees. Payday loans have an annual percentage rate of more than 400 percent! In other words, you will have to pay a lot of money to borrow the money you need. Payday loan does not require collateral. Collateral is anything that has value that secures the loan. Because payday loans are a class of unsecured loan, they do not require collateral.

Personal loans have stricter eligibility requirements

Although personal loans offer better terms, it can be more difficult to qualify for them than for a payday loan. Some personal loan lenders require borrowers to have a credit history, a minimum annual income, or a certain ratio of their debts to their income. You can research some lenders online to find one that matches your financial situation. You can regularly find the requirements of the lenders on their websites. If you have no credit history, find a lender that accepts borrowers with no credit history.