The Deadly Trap of Payday Loans and Bad Credit

“A man with debt soon becomes a man with disturbance.”

~ Amit Kalantri

Payday loans are marketed as a quick easy solution to temporary financial difficulties. They are also available to people whose credit records are bad or in some cases, blacklisted. They boast simple application processes with minimal paperwork and often ‘same-day approval’. A payday loan can be a lifesaver, but it can also turn into a nightmare. And a cycle of debt that is difficult to break loose from.

Payday loans carry high interest rates for the convenience of instant financial assistance. These short-term loans are unfortunately also open to people with negative credit scores, which pulls them into a cycle that starts with borrowing money to make it to the next payday. In the end, an entire salary can easily end up in the pockets of creditors, forcing them to repeatedly take out short-term loans to make ends meet, until they no longer can.

Payday loans are attractive because the likelihood of approval is much higher than other forms of debt packages available. Consumers who have a negative credit score may find themselves in a position where a payday loan seems like the only option for survival. But let us look at the facts:

  • A payday loan often ranges from R500 – R8000.
  • Fees on payday loans are:
    • Service Fees
    • Initiation Fees
    • 15% VAT
    • Interest rate depending on the lender (5% – 27.1%).
  • If you do not pay back the money within the allocated time frame, your credit score will be impacted negatively. You may even be blacklisted.

What to Consider Before Taking Out a Payday Loan

Sometimes there is no alternative in sight. Before you sign the agreement of a payday loan, ask yourself the following questions.

  1. Do I really need to take on this type of debt and can I survive without it?
  2. How will I repay this debt?
  3. Can I repay this debt within the prescribed time frame?
  4. How will I survive financially for the rest of the month after repaying this debt?
  5. Am I borrowing this money because there is no other alternative?
  6. Is the debt agreement suitable, have I read the fine print?
  7. Can I risk damage to my credit record if I fail to pay.
  8. Have I considered going under debt review and freeing up finances in my budget?

If you still plan on going ahead with the payday loan, is it because you have found yourself in a debt cycle already? Is a payday loan the only money keeping you afloat above the other responsibilities? If so, debt review can be a lifesaver with no risk of blacklisting or negative impact on your future finances.

How Can Debt Review Help You?

Debt review is a legal process that protects the consumer. The process places you under protection from any further action by creditors. Regardless of the position that you find yourself in, a payday loan will only solve an immediate financial problem. Debt review can provide immediate relief, as well as long term relief.

The process of debt review prevents your credit score from being blacklisted. A payday loan runs the risk of blacklisting you if you are late on your payment or if you default on it. In both debt review and payday loans you need to be employed to be able to afford the payments. Debt Rescue has structured their process in such a way that your financial commitments fall within your affordable budget.

Instead of throwing yourself into a never-ending cycle of debt through payday loans, rather remedy the situation and reach the stage of financial freedom through a simple online process with Debt Rescue. Call a consultant now to find out how we can assist you financially today.

For the last 14 years, Debt Rescue has been at the frontlines assisting over-indebted South Africans. Debt Rescue has managed to help thousands of consumers achieve financial freedom through the debt review process. Contact us now to see how you too can manage your debt affordably.

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