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Carrying Over Payday Loans to the Next Pay Cycle

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by Bonny Styles
(New York, USA)

Financial services are expensive and payday loans are some of the most expensive financial services are payday loans. Payday loans come with interest rates higher than thirty percent and fees that are charged for borrowing, extending the loan and missing the deadline for the loan repayment date.

The trouble with Payday advances is that the customer is borrowing money against the wages that have yet to be earned. Borrowing against the wages that have yet to be earned causes a shortfall in the next section of the budget, throughout the next paycheck and often requires the customer to have to use another payday loan, extend the current loan or face financial shortfalls throughout the upcoming pay period.

To avoid the shortfalls that come with the Payday loan cycle, customers often choose to extend the payday loans. Most customers choose to repay a portion of the payday loan that has been borrowed, leaving the remainder of the payday loan until the next paycheck is received to reduce the shortfall and stress that comes with trying to manage a budget that doesn’t leave enough to cover the expenses.

When the payday loan is carried over into the next cycle, customers are charged higher fees because unlike the previous payday advance, the loan is being carried out for the entire term of the paycheck, for two weeks – rather than the more common one week payday loanthat customers take advantage of.

Higher fees accompanied with higher interest rates can increase the costs of the payday loan, accumulating high fees for the loan.

Carrying over the payday loan comes with higher interest rates and fees, and can cause the customer to remain behind on the finances for longer, up to four weeks after the payday loans – already stretching the budget that has been strapped for customers living paycheck to paycheck.

What’s the Payday Loans Trap?

If you have ever taken advantage of the payday loans that are available from those street corner shops or loan services that are available online, then you know about the financial strain that comes from having to repay a payday loans from the wages that have yet to be earned. Borrowing against those wages that are often earmarked for another purpose in the budget can put strain on the future, causing the borrower to rely on the payday loan services again – for the next pay cycle.

This is the payday loans trap. The customer borrows against the wages that are going to be earned in the future and is left without the funds to repay the budget and cover the expenses that are required for the home and living. For this reason, the customer is left short and chooses to go back to the payday loan service, to take out another loan to get them through the shortfall – while being able to repay the loan in the first place.

Once customers get stuck in the payday loan trap, how can they get out of it? Getting out of the payday loans trap requires a boost in the income or using found money in the budget to repay the payday loanwhile still being able to cover the expenses that come up for living, and the household.

Alternatively, using funds from an unexpected bonus, a tax return or even finding a way to drastically reduce the expenses for one pay period to live on less. Making these drastic cuts to the budget can be uncomfortable throughout the short term but can help the customer to get by on the funds leftover once the payday loans has been repaid.

Using these methods, the customer can finally get out of the Payday loan trap – and plan in the future to avoid using the expensive service in the first place.

Updated: December 13, 2015 — 1:33 am

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