$7.42. I will never forget it. I had $7.42 in my bank account. Rent was overdue, payday was a week away, and my refrigerator and gas tank was running on empty. It was a desperate moment, and it felt like I had no options. What do you do when you need cash fast? Overdraft your bank account? Go into credit card debt—that is, if you aren’t already maxed out?
Payday loans may seem like the quickest way to get the landlord off your back and food in your family’s bellies, but not so fast. While it may seem you have few ideal options available, payday loans just might be the worst of the worst. Here’s why.
Exorbitant Interest Rates
Payday loans come with a hefty price. One that can be crippling and up to ten times higher than any personal loan or credit card you will ever have. We’re talking up to 400% APR. Which is crazy. And these high-interest rates are what can get you into a vicious cycle of borrowing every payday, just to keep up.
Crazy High Fees
When you’re stuck in a debt cycle and unable to make your payment each month, you better believe you’re going to pay for it. On top of the ridiculous APRs, payday loans charge fees on late payments. The more you borrow, the harder it is to pay it back, which leads to higher fees. And on and on it goes.
Vicious Debt Cycle
Payday loans are promoted as a short-term solution to get cash in your hands until payday. But that never happens. The system is built to suck you in with the promise of an easy fix, but keep you in by assessing interest rates and fees that will get you stuck in a cycle of borrowing just pay off your old loans.
Unhealthy Borrowing Habits
What may seem like a temporary fix rarely is? When someone is relying on payday loans to get by, there is usually an underlying issue that won’t be fixed by continuing to borrow on high-interest loans. Certainly, there are times when life hands you more than you can handle. But try not to let those one-offs spin you into a cycle of unhealthy borrowing habits that will last longer than the temporary situation you are in.
There is a (WAY) Better Option: Earnin
The folks at Earnin are working to solve the broken system that is holding us back. Earnin provides you with access to your pay as soon as you’ve worked it–with no fees and no hidden costs.
With Earnin, you can cash out your earnings anytime you want, up to $100 per day, and even set up overdraft protection to ensure you always have money in your account.
“A two-week pay cycle is hard on people who have to budget every penny, says Ram Palaniappan, CEO of California-based Earnin. “If they worked today, they should have access to their money today.” If you are ready to get paid for the hours you’ve already worked, download the Earnin app today.