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Bad Type of Loan

Many people who use payday loans are unable to get cash advances from traditional banks. This is often due to their credit history. Banks will typically reject people who either have no credit or bad credit. This has left open a large market for payday loan companies to make money from. Many services are now offered online, making it easier than ever for people to borrow money. The irony of this is that many banks are now giving credit to payday loan companies in order to tap into the market.

This allows the banks to make money off the payday loan industry without having to directly provide loans to the customers it normally rejects. This fact alone should make anyone who uses payday loans angry. With the rise of the internet many people don’t even have to fax information to be approved anymore. It is not necessary to show a credit history when applying for a payday loan, and this is why the industry has become so large. Many people argue that payday loans are good for people that need cash for emergencies.

My answer to that is people should save money for emergencies. If you save money consistently, you should rarely have to use a payday loan. These loans are easy to get but come with a lot of strings. Many people become dependent on them, and begin using them between each paycheck. This puts them in a state of being dependent on a loan company that doesn’t have their best interests in mind. The large interest rates they charge guarantee they will get more money back than they loan out to you.

My advice for payday loans is to avoid them unless you have a large emergency and no money is available. If you save a large amount of your income every month, you should never have to use a payday loan. These loans can put you into a cycle of debt which is hard to break free from. As soon as you pay back one loan, you will probably have to borrow another one. Some companies even ask for collateral, such as your car. If you default on your payments, your car could be taken from you. This is something you should want to avoid at all costs.

The payday loan industry will continue to grow larger, especially due to the popularity of the internet. Many of these companies are only allowing new customers to borrow $500 until they can demonstrate a good payment history. While some would say that this is a good thing, I think that this will entice more people to jump on board and begin borrowing money. It is important to understand that the payday loan companies win, not you. You are not going to get ahead financially by using their services.