Payday loans are great alternatives to credit cards when you have a low credit score and can’t get access to conventional credit cards. You don’t have to deal with a long application and you usually get approved in minutes. You don’t have to wait to get your money which is a big help if you have an emergency. In most cases, you get the money you need the next business day.
These loans are very easy to get, and you don’t have to go through a credit check which makes them perfect for people with bad credit. Your credit isn’t an issue with a payday loan as the loans are based on your income. The size of the loan that you can receive is going to depend on how much money you make, and you are going to need a job to get approved for the loan.
The downside of a payday loan is that the interest rate is often a lot higher than what you would get with a credit card. These loans are designed to be paid back when you get paid since the interest rate is so high. Unfortunately, many people don’t do research on the lenders to find the best interest rates and they also take a long time to pay the loan back and then find that they can’t make the payments.
Defaulting on a payday loan has many negative consequences. The first thing that happens is that your loan gets sold to a collection agency and the collections account is going to go on your credit report where it is going to completely destroy your credit score. If you have a low score you are not going to be able to get any type of loan and you are going to have to pay extra for your car insurance. You will have a hard time getting a cell phone and you might have to put down deposits on your utilities. Bad credit can even ruin your chances of getting the job that you want.
The collection agency is going to make your life miserable. They are going to call day and night and they will also call you at work and even harass your neighbors and your family. The collector isn’t going to leave you alone until you set up a payment arrangement. Each day your account is going to be accumulating interest that is going to make the balance of the loan explode. A loan that is a few hundred dollars could easily grow to thousands of dollars in a short time.
If you don’t make payment arrangements, the collection agency is likely to take you to court.
Since many people don’t show up to court when they are being sued, you are likely to lose the case and the collection agency is going to get a judgement for their client. Once the lender has the judgement they can go after your assets and they can also garnish your wages.
Having your wages garnished can leave you without the money you need to pay for your expenses and your wages could be garnished for a very long time. Your quality of life is going to be ruined and you are going to have financial difficulties for a long time. Even worse, you are going to be paying a lot of money for interest since your account is going to keep accumulating interest until you pay it off. You might never be able to pay it off, so if you have defaulted on a payday loan you might want to consider bankruptcy so you can wipe the slate clean.