Pay Day Loans - Interest rate trap!
A low credit score makes no difference for people who get Payday loans. Businesses such as Payday loans don't bother checking your credit score or credit history. The only qualification you need is to be employed. If you have a job then you can easily get a Payday loan until your next pay day for amounts of $100 to $500.
Payday loans come with a hefty cost to the borrower though. What would you say if your bank told you they would charge you 300% interest on your next loan? Payday loans can run not only as high as 300% but sometimes over 700%.
I just did a check on a payday loan calculator of a payday company and found that on a $100 loan for one month the fee is $60 which incidentally works out to 706.5%.
When you think that the people who are being charged such hefty interest rates are those that are mostly the working poor it is indeed a shame.
Often people who have made poor choices or are faced with unfortunate circumstances seek out places like Payday loans to tide them over. Many other middle class families perhaps also sometimes down on their luck turn to such loans as a way of a temporary fix.
Unfortunately, many such borrowers end up in a vicious cycle where they end up continuously borrowing to pay off interest that never seems to go away and keeps mounting. Payday loans for many people living week to week on low salaries becomes a trap they may not be able to get out of easily.
Unfortunately people with bad credit, mounting unpaid bills and maxed out credit cards sometimes find themselves continue to turn to places like Payday loans.
Many people do not realize that there is help available when it comes to credit counseling. There are also government agencies like Credit Counseling Canada
If you find yourself stuck in a situation where you need help to fix your credit then do seek help and put your life back in order.