Why You Should Avoid Payday Loans

When you need extra cash, you may feel desperate and consider payday loans. Although these loans may be fast and easy to obtain, they come with a lot of drawbacks. Whether you’re debt-free or working with debt consultants in Victoria, there are a few reasons to avoid payday loans at all costs.

High APR

Debt consultants from 4 Pillars will tell you to steer clear from payday loans because the APR is significantly higher than other types of loans. Lenders take advantage of borrowers desperate for money by increasing how much interest they charge. The APR can equate to 391 percent for a two-week loan or $15 for every $100 borrowed.

No Boost to Your Credit Score

Unlike other types of loans, payday loans won’t boost your credit score. Consultants from 4 Pillars in Victoria advise against these loans because there’s no reward for repaying the money you borrow. The lenders are also quick to report defaults or sell off the loans to collections agencies.

Difficulty with Repaying the Loans

One of the primary reasons many borrowers find themselves in trouble with payday loans is that they have access to their bank accounts. If one payment is late, you can expect constant phone calls from lawyers. Lenders also attempt to recover the money you owe by withdrawing money directly from your bank account.

A Lack of Transparency

Payday loans are known for confusing terms and a lack of transparency. Their regulations differ and aren’t consistent with their borrowing limits. A consultant from 4 Pillars will warn that you don’t always know who ends up owning the loan.

If you want additional information about payday loans, contact us to speak to one of our 4 Pillars debt consultants in Victoria.