Direct payday loans are notoriously known for carrying high interest when not paid off on time. Taking a short-term loan and broadcasting extremely high APR alerts are tactics used by competitors to divert customers away. Regulating these loans has become a mission for some states in order to protect the residents from further debt problems.
Credit Cards joined Payday Loans with regulations of their own.
Credit cards must inform users about how making minimum payments only will affect their balances. On your credit card statement, there will be a payment information box which will let you know in detail how much you owe, what amount is due and when it is due. You will also find information pertaining to making only minimum payments. The minimum payment warning will inform you how much your loan will cost over time. Most people assume that using credit cards (with lower interest rates) are better to use than online payday loans. Credit cards will carry your balances over for as many years as needed to pay them off. The revolving debt allows you to spend whatever available balance is there. They will even allow you to spend more than allotted and charge a fee for overspending.
The minimum payment amount is calculated as a small percentage of the balance which you are required to pay. The interest will eat up most of that payment and your balance will only go down by a very small margin with your monthly minimum payment. There is a warning in this payment information box of how long it will take you to pay off your balance making minimum payments only. This of course is assuming that you never use the credit card during the payoff. This payment is compared to one other which is a slightly increased amount. The length of time it will take to pay off the loan with this other amount plus how much you will spend and the savings as compared to the minimum payments. These warnings are shocking to those who don’t think low interest is any big deal compared to direct payday loan interest. The Credit Card Act wants these figures to be alarming to people so they will be motivated to pay down their debt.
Many people choose online payday loans over credit cards to avoid falling into the traps to continue spending as well as take long periods of time to pay off the balance. In addition to the payment warnings, the credit card companies are required to warn customers about what will happen if payments are received late. Not only will there be a fee, usually $35, but that the interest rate will also increase. The increased interest rate will be very comparable or even greater than online payday loan rates. Where is the protection for consumer’s rights by the state government for these interest rates?
You will also find a phone number for a credit counseling service. Many of these counseling services are funded by the credit card companies. If you are looking for assistance with your debt, you may just want to contact one not affiliated with your creditors for the best unadulterated advice towards your credit situation.
Direct payday loans online do carry high interest rates, with no trap to keep your loan out for longer than needed. There is no option for continued spending as you pay your balance off. Use a payday loan to make a credit payment on time, help with an emergency payment or cover unexpected costs.
