Payday loans can be more difficult to pay back than traditional loans, as lenders don't always assess a borrower's ability to repay before granting the loan. These loans come with high interest rates and fees that can make it hard to keep up with payments. If you can't pay back a payday loan, it may be sent to a collection agency, which can damage your credit. It's important to compare payday loan interest rates of 391%-600% to the average rate for alternative options such as credit cards (15%-30%), debt management programs (8%-10%), personal loans (14%-35%), and online loans (10%-35%).
These loans are more complicated to apply for, but they have much lower interest rates than payday loans. It is illegal for a payday lender to threaten you with jail time or criminal prosecution for an unpaid debt. If you are automatically deducting payday loan money from your bank account, ask the bank to stop the automatic deduction. If the borrower's status allows, they can pay just the charges due and extend the loan.
If you can get a personal loan, you can significantly reduce the interest rate and borrowing costs compared to payday loans. People may use payday loans to cover rent or utility bills, but high interest payments often leave them in a worse state. Customers may use payday loans for emergencies such as doctor visits or car problems, but most use them to cover utilities, rent, or other recurring monthly bills. Defaulting on a payday loan can bring a lot of stress and uncertainty about the future.
If your social security benefits or VA payments are deposited directly into a bank account that a payday lender has access to, you can redirect where your automatic deposits are made. Once you apply for a loan with a payday lender, the high fees and short repayment term associated with your loan can make it hard to stop borrowing. Payday lenders require borrowers to write a check for the amount of a loan plus a fee that the lender withholds. It's possible to pay more on your loans if you can work more or sell additional items to get more money.