The Payday Loan Snowball Effect

Payday loans are seductive and for many, seem like harmless bad credit loans. They are particularly attractive for those consumers who find themselves with bad credit. Their lack of creditworthiness drives them to look for alternative ways to finance their needs. Most often, payday loans, which are a form of bad credit loans, trigger the snowball effect that makes borrowers enter a never-ending cycle of payday loans.

The recent recession years have created an environment that is perfect for payday loan companies to flourish. With so many people struggling to cope with increasing expenses on lower incomes, it is no wonder that an entire industry is now thriving around the very concept of payday loans.

The really negative part about this is that they target desperate people who really need financial help to pay daily living expenses. Instead of seeking ways to reduce their expenses and save money wherever possible, people will often turn to payday loans to solve their problems.

Many people choose to go to payday lenders, hoping that it will help them get over their financial difficulties. Their credit history does not influence the lender’s decision of granting the loan as long as the applicant has a job and, therefore, a stable source of income. A post-dated check will guarantee the loan and within 2-4 weeks, the lender needs to be repaid. Although it sounds great, the fact is that most borrowers cannot afford to pay their payday loan back on time. If you think about it, it was to be expected since most people who apply for pay day loans, live from pay check to pay check. Their expenses equal their income, with no possibility of saving. Any extra cost is a new burden on their already weighed down income. How would they be able to pay back on time?

So what do they do? Unfortunately, these people seek new ways of financing to cover for the obligation activated by their newly acquired and unpaid pay day loan. Again, pay day loans come to the rescue. However, by the time they find a new one, the other pay day loan has already accumulated considerable interest and fees.  The result? An immense debt that is too big for anyone to handle. In fact, there are times that the pay day loan ultimately costs 10 times the original loan.

No matter how you look at it, payday loans with huge interests and short repayment times are not a good idea. They only generate more debt, which becomes so large that it is impossible to pay off unless you win the lottery or inherit a fortune. The snowball effect of such loans simply suffocates lower and middle class individuals who are in desperate need of funds. Another pay day loan will not help them. It will only prevent them from finally breaking loose of the vicious payday loan cycle.

Remember, there are other alternatives out there for you. Contact Fast Access Finance today to discuss the possibility of applying for a bad credit personal loan, car title loan, or mortgage.