Are you considering taking out a payday loan to meet your bills until your next paycheck? Payday loans may sound tempting. If you simply Google “payday loans,” you will come across several websites that offer quick cash loans. However, you should be aware that, because of the sky-high interest rates associated with payday loans, they are the most expensive type of debt you can incur.

Caution: the debt trap of payday loans

Getting a payday loan is quite simple. A reliable job, an account, and an address are all you need. No credit check is necessary. A payday loan is just intended to cover you until your next paycheck. This indicates that the typical borrowing length is two weeks. You can borrow money for a very brief period of time—for instance, $200 for 14 days.

Once the period for the loan term is over, you will be required to repay this sum in full, together with interest. Therefore, you must deduct $200 plus roughly $53 from your next paycheck. In reality, one of the terms of your loan is that you must either provide a post-dated check for the full amount of the loan or agree to a process known as a “pre-authorized debit,” which enables the lender to deduct the repayment from your bank account when the loan is due. With this, you won’t have to worry about the  payment deadline.

Do you think you’ll have an extra $253 on your next paycheck if your cash flow is currently tight? Be sincere. You run the risk of falling into a debt trap or debt cycle where you have to keep borrowing money from other sources to pay back your payday loan if you are unable to repay that amount on time.

How much does a payday loan really cost?

The true cost of payday loans is often concealed by payday loan providers. They will provide you with a monetary amount for the amount borrowed as opposed to the annual interest rate you pay. For instance, “get $300 for $60 over 14 days.” Although $60 may not appear to be much, it represents a 600% annual interest rate when you do the math. Recall that provincial regulations on payday lending differ, with rates varying from $15 to $25 for a $100, two-week loan.

Strategies to prevent payday loan debt

Think over these alternatives before deciding a payday loan is your best option.

1. Contact your loved ones and friends

Consider having an open discussion about your predicament with family or friends before you turn to seeking a payday loan. You’re probably not the only one having trouble finding extra money. Many homes are struggling financially as a result of different issues and emergencies. When you’re feeling stressed by your financial issues, family and friends can be a fantastic source of support.

2. Speak with your creditors

Try speaking to your creditors if you are having problems paying a bill or credit card. Most creditors will be sympathetic to your plight and willing to cooperate by extending your due date. Your landlord can be in the same position. Just keep in mind to bring up the topic before your rental payment is due and to honor your word. It’s crucial to fix the problem so that it doesn’t occur every month.

3. Look at alternatives to payday loans

Find out what credit options are available to you if you find yourself needing to borrow money. Instead of receiving a payday loan, there are much more affordable options to borrow money. You might be able to get a line of credit from your bank, overdraft insurance, or a cash advance on your credit card.

If your low credit prevents you from obtaining these more manageable forms of loans, you might want to talk to your employer about obtaining a brief advance on your salary. You might also think about freelancing or taking on a part-time job in the evenings or on the weekends if you have the time and ability to take on more work.

4. Speak with a debt expert at EmpireOne Credit Solutions

If you can’t make it until your next paycheck without resorting to credit, it’s time to consult with a debt expert at EmpireOne Credit. Your situation will be examined by one of our debt experts, who will also discuss debt solution options that are significantly less expensive than payday loans with you. Your unsecured debts can be reduced, interest rates can be frozen, and your monthly payments can be decreased. Debt consolidation might also be a great option. To know what option to go for, reach out to us today for a free consultation.