Payday loans or short term payday loans act like lifesavers if you need cash quickly, but high fees and short payment durations can lead to a cycle of debt.
A payday loan is a short-term loan for a small amount that’s typically due on your next payday, along with fees. These loans bridge the gap between paychecks to deal with unforeseeable expenses but may turn into debt traps.
Here’s why: Some cannot afford the loan and the fees, so they end up paying even more fees to delay having to pay back the loan, refinancing the debt until they end up paying more in fees than the amount borrowed.
How payday loans can affect the chances of getting credit?
Depending on the number of credit inquiries you make, the types of credit you use, and the terms of your borrowing all being visible on the credit, payday loans may end up contributing to a lower credit score. Even if you prove to be a reliable borrower and never make a late repayment, the mere fact that you rely on payday loans can be a signal that your regular financial management isn’t as good as it should be if you find yourself reliant on short-term loans on a regular basis.
From the perspective of the lender, remember that they are regulated and are duly bound to act responsibly. If you are relying on short-term borrowing on a regular basis, lenders may decide that it wouldn’t be responsible to accept you for a long-term personal loan as your credit history may raise questions as to how your circumstances would enable you to meet your repayments.
Alternatives to Payday loans
There are a number of alternatives which you can resort to rather than getting a payday loan such as personal installment loans, advance salary loans, salary based loan, etc.
Payday loans tend to have higher interest rates, which means consumers often find themselves repaying one loan but then needing to take out another shortly afterwards. This pattern has the potential to be disastrous for the credit rating and how lenders will view your credit file, so while you may feel you have no option but to take out a payday loan in some circumstances, contact PayMe India for best rates.
If you are looking for a cash infusion, payday loans may make your problems better or worse depending on situation to situation. Have more questions? Contact PayMe India now!