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Payday loans are small, short-term loans that are meant to cover expenses until you get your next paycheck. They often come with a high interest rate and are expensive to repay.

Many people turn to payday lenders because they are deceptively easy to get. But they can also trap you in a cycle of debt and damage your credit.

They are deceptively easy to get

Payday Loans Columbia loans are small, short-term loans for a limited amount of money that typically come due on the borrower’s next payday. The loans also have high fees. Often, these fees can be equal to or even exceed the loan amount. This is why the Consumer Financial Protection Bureau (CFPB) calls them debt traps. Many borrowers end up rolling over their payday loans, or refinancing them to extend the repayment terms, which can lead to further debt accumulation.

Unlike traditional loans, which usually require a credit check, payday loans do not. This makes them more accessible to people with bad credit. However, if you do not repay your payday loan on time, it can damage your credit score.

If you are struggling to repay your payday loans, consider seeking advice from a nonprofit credit counselor or bankruptcy attorney. Depending on your situation, it may be possible to file for bankruptcy, which stops collection activities and allows you to get back on track.

They are expensive

Despite their high interest rates, many people use payday loans because they are unable to afford other sources of credit. For example, a two-week payday loan of $500 typically costs $15 per $100 borrowed, which is the equivalent of 400% APR, according to the Consumer Financial Protection Bureau.

These loans are often used to cover recurring bills such as rent, utilities and credit card debt. Unfortunately, most borrowers cannot repay the loan in the typical two-week repayment period and have to pay fees to roll over the loan or take out another one, creating a cycle of debt that can be difficult to break.

Consider alternatives to Payday Loans West Valley City loans. For instance, you can ask your employer for a paycheck advance or apply for a low-credit card. You can also check if your lender is licensed by the New York State Department of Financial Services, which offers unsecured loans at lower rates than most payday lenders.

They can trap you in a cycle of debt

A payday loan is a short-term loan for a small amount of money, typically $500 or less. It is due on the borrower's next payday, which can be in as little as two weeks. The lender will require the borrower to write a postdated check or give them an authorization to withdraw funds from their bank account. When the payday comes, if the borrower cannot afford to pay the full amount back, they must roll the loan over and pay more fees. This can quickly become a vicious cycle that can be impossible to break.

If you need to borrow money, consider other options. Some banks offer personal loans with lower interest rates than payday lenders, and you can also get debt advice from a credit counselor. Alternatively, you can look into your local laws and regulations about payday lending. You can also contact the Financial Ombudsman to find out about your rights. They can help you if your payday lender has broken the rules.

They damage your credit

Payday loans don’t have a direct impact on your credit score because they are unsecured debts, and lenders typically don’t perform a credit check. However, if you default on a payday loan, it could affect your credit. A lender’s collection agency might report your unpaid balance to the three nationwide credit reporting agencies. This will lower your credit scores significantly.

Lenders might also sell your debt to a collection agency or even file a lawsuit against you. This can cause you to lose your home, or have wages garnished and even result in asset seizures.

You can help prevent your credit score from getting damaged by payday loans by avoiding bouncing checks, negotiating payment plans with creditors and seeking debt advice. There are a number of non-profit agencies around the country that offer free credit counseling services. Alternatively, you can use the overdraft protection feature on your checking account to prevent bounced checks. This may incur a bank charge, but it can protect your credit score.