At first glance, to take a payday loan looks extremely attractive. Without much efforts, with just an ID card everybody could take a small amount of money to cover important and urgent expenses. However, this comes with some serious disadvantages, which is good to be considered before applying for a payday loan.
Extremely high interest rates
Perhaps the most important disadvantage associated with payday loans is the extremely high interest rates, often passing one hundred percent, which these loans have. It should be noticed that these rates are not so easy to be seen and understood correctly, for example, when the loan is not so large. If you take 200 Euros on March 1 and must return 220 Euros on March 20 it seems something small, but in terms of the interest rates this actually is a huge loss for you
Penalty fees for overdue loan
Another major disadvantage connected with payday loans are the penalty fees that financial institutions imposed for delayed payment of the loan. Often, penalty fees are so high that only after several missed payment periods, the fees already exceed the amount of the loan itself. This often leads to a situation where the customer of a payday loan must pay only the interest rates and the penalty charges without being able to start repaying the loan and thus to get rid of him. There are cases in which one finds oneself in this situation for years.
Poorly regulated legal framework
The payday loans are a part from the financial law, which is not yet sufficiently covered and unlike the more general loans, the consumer rights are not sufficiently protected. In practice, this means that when you decided to take a payday loan is better to be very careful about the legal side of the issue and how your rights are protected. This mean to be aware for techniques such as hidden text in the contract, misleading clauses and so on. The best option for anyone who has decided to apply for a payday loan is to consult with a lawyer during the signing of the loan agreement.
Along with its benefits, the payday loans have serious deficiencies and if one is not careful enough is quite possible to run into serious financial difficulties.