Unfortunately, the payday loan world is full of deceit and untrustworthy practices. If you’ve taken out a payday loan before, you may have encountered dishonest lenders that weren’t completely truthful or straightforward. When you’re not fully aware of what you’re getting into up front, it makes it impossible to make an informed decision.
The details of payday loans can seem confusing and complex if you’re not aware of all of the details. So, we’re sharing 8 payday loan facts that you should know and be aware of.
1. They’re short term loans.
The typical payday loan has a two-week term. It’s a short-term, small loan that is typically due on your next payday. They are not meant to be long-term financing options. However, for many, that’s what they become.
2. They have long-term repercussions.
With average interest rates of 400% or higher, payday loans are not financially feasible. With only 1 out of 5 payday loans being paid off within the two-week repayment period, the cycle of rolling over loans becomes normal and out of control for 80% of payday loans. They are not affordable loan options. The resulting long-term debt and unmanageable fees and interest are repercussions that affect not only your finances, but your entire life.
3. The average payday loan is $375 … yet the average borrower pays nearly 1.5 times that amount in interest.
A payday loan is a small loan, typically in amounts of $100-$500, though depending on the state, they can be larger. The average payday loan is $375. This study by The Pew Charitable Trusts, found that for an average loan of $375, the borrower ends up spending nearly 1.5 times that amount ($520) in interest alone.
4. Payday lenders have access to your bank account.
When applying for a payday loan, it’s easy to be so focused on getting the money that you desperately need, that you overlook the fine print. While payday lenders do not run your credit to verify if you’re eligible for a payday loan, they do require that you have a bank account. And they will require authorization to access your bank account. For many, this results in unwarranted debits by the payday lender from your bank account.
5. Online payday loans are open doors for scams.
When applying for an online payday loan, you’re required to enter your personal information, such as your social security number, full name, address, DOB and more. Immediately after submitting this information online, it’s sold to dozens of other online payday lenders and unfortunately, scam artists. These scam artists are good at what they do. We’ve worked with hundreds of clients who have, unfortunately, been scammed by an fake online lender. To read more about this, head to our previous post, “Online Payday Loan Scams: What You Should Know”.
6. They’re traps to more debt.
Four out of every five payday loans are rolled over because the borrower is unable to pay back the full amount within the repayment period. And on average, a borrower takes out 8 loans per year. Payday loans are not a short-term solution, as they’re advertised. They’re a long-term problem. The payday loan debt trap is a very real thing and we see it every day with the hundreds of clients that we work with.
If you’re struggling with getting rid of your payday loans, we can help. At Real PDL Help, we work one-on-one with our clients to help them get out of payday loan debt and regain control of their life (and finances). Contact us today!