Why you need to avoid payday loans

Any type of debt could complicate your financial health and bring more stress into your life. Avoiding debt is best if possible. There are certain types of debt that everyone should avoid at all times.

The issue with payday loans is its interest rate. When annualized interest rates go into stratosphere and sometimes exceed 500 percent. Add insult to the injury, many payday loans carry additional fees making it the most financially damaging loan type to avoid. Most people use this type of loans for short durations. Some published reports indicate that repeated borrowers use this type of loan facilities more than nine times a year. A total of two percent of all borrowers in the U.S. use this type of loans.

For those who are seeking this type of loans should realize that there are other alternatives. Your bank or credit union can provide a line of credit to cover short-term emergencies. Their rates are far better than payday loans. Your family and friends are also an option to borrow money when you face financial difficulties. Make sure to agree on terms before borrowing from family members and friends to keep your relationship long after you pay back your loan.