Are Payday Loans Risky?

Are payday loans risky?Many people ask us are payday loans risky, and we think they mean that by taking out a payday loan, are you running the risk of even further financial disaster. The answer is that yes, you are taking a risk when you take out a payday loan, but perhaps not the one you might think.

When you get a payday loan, the risk is that you’re making the problem worse than it is already. It may masquerade as the solution, in a few weeks time it will be much more clear what it really is. It’s basically a way of extending the time it takes you to solve your financial problem. It’s like bottling your problem up, and sending out to sea for a few weeks. Then it comes floating back to you, and you bottle it up again and send it off, two weeks at a time.

The only problem is it keeps coming back to you. This is the system of loaning and re-loaning, and will add hundreds, and potentially thousands of dollars to your current financial crisis. It’s the bread and butter for payday loan companies, and it’s the reason why so many people get buried in payday loan debt. So the risk of taking out a payday loan is that there isn’t a good exit strategy on how to get off the spinning carousel.

Are Payday Loans Risky? Answer: Not Inherently.

The reason why payday loans are risky, is that the deck is already stacked against you when you walk in the door or fill in an online application. However, it is not the fault of payday loan companies entirely. It is just the situation that is risky. You’re up against some financial calamity, or you’re spending more than you’re making, or living beyond your means. If you’re to the point where you need a payday loan, you’re already in a risky situation. So payday loans aren’t inherently risky, they are just used by people that are already walking the line.

Why So Much Risk?
There reason you’re in such a tumultuous position is because there’s no guarantee that things aren’t going to get worse before they get better. When you take out a payday loan, it’s actually a very optimistic action to take. You’re betting that the future holds the key to your salvation, and basically saying that lightning won’t strike twice. You’re also using your future as collateral for your past and present. All of these have some risk involved, because realistically speaking, things might not improve for you, and could get worse.

Let’s say your car gave out on you, and you needed a payday loan to make the repairs, so you can get to work, so you can get a payday, so you can pay off the payday loan. Who’s to say that your car will make it those next two weeks? And you probably will re-loan the payday loan, so now your car has to make it another two weeks, and another, until you finally are able to pay the loan off. And now you’re just waiting around for the next malady to hit, and you’ll be right back in the payday loan cycle.

Life Is Risky
So payday loans are only as risky as life is. Payday loan companies make it this way though, because they charge such high fees that the loans themselves become an additional problem, and not a cure of any sort. If they offered rates that were more reasonable, there would be less risk of getting caught in the loan and re-loan cycle that so many people find themselves in.

If you can, try to avoid getting a payday loan in the first place. If you do get a loan, do your best to pay it off as soon as you can, by taking out smaller and smaller amounts on subsequent loans. Once you’ve got it fully paid off, put any extra cashflow into a savings account, at least until you have $1000 in it, so you avoid the need for a payday loan in the future, and you plan for the risks that come with living life, so you can get on with yours.

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