freedomcashlenders

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In most situations, instant loans aren’t a good idea and should be avoided if possible. Here’s a closer look at the drawbacks of this convenient funding solution:

Steep borrowing costs. According to the St. Louis Federal Reserve, the average payday loan interest rate is 391 percent for the first two weeks. So, if you need to borrow $400, you’ll pay an extra fee of $60 to get the funds you need today. This fee may seem nominal, but borrowing costs can add up rather quickly if you’re unable to repay what’s owed on the due date.
Overdraft fees. Lenders generally require access to your bank account to initiate repayment when the loan becomes payable. If you fail to request a rollover, extension or if neither of these options are offered in your states, you’ll likely incur penalties from your financial institution until your balance is sufficient enough to cover the amount owed.
Short repayment periods. If you’re already facing financial hardship, it may be challenging to repay the loan plus any applicable interest and fees within such a short timeframe. In fact, four out of five payday loan borrowers rollover or renew their loan within 14 days, according to the Consumer Financial Protection Bureau. Unfortunately, this option comes at a cost, and continuous rollovers or renewals could cause the fees to balloon. Using the example above, if the lender charges $60 per rollover and you extend the loan twice, the balance will increase to $520 in just one month.