However, this often leads to January financial disaster when families have little money to pay the credit card off and have to borrow money to make it through.
And, if they had bad credit or unable to get a traditional loan, they may turn to payday loans. This is not always the best thing to do. Before you agree to a payday loan, the Better Business Bureau says there are a few important things to remember.
BBB employee David Smitherman said payday loans could actually spiral into a mountain of debt that can take years to pay off. People should read the contract before signing to recognize what is in the fine print including the interest rate.
Smitherman said the loan must be repaid by the designated schedule or it rolls over into a new loan with a new interest rate and terms. In the end, the initial money you borrowed as increased tremendously.
Many states have passed laws that determine how much a payday loan lender can charge you and the amount of money that can be borrowed. In Alabama, there were several bills brought forth to regulate the industry and decrease the maximum interest rates. Many other states are following its example.
The big thing to remember is that you should know what your contract says – to be sure you know what is being agreed to and what happens if you’re unable to repay the loan in time.
