Payday loans are becoming increasingly popular with certain people who cannot come out on their wages the last few days of the month. In spite of the fact that many borrowers have fallen into debt because of these loans they keep on taking them as a last resort when they go broke just before they are due to be paid again.
The money lending agencies who advertise these small loans do not advertise their high interest rates they charge for a very short period of time. Theoretically the loans have to be paid back in full on the day the borrower receives his wage check. This would be easy to do were it not for the enormously high interest that the lenders tack on to the loan.
The interest is far more than the value of the loan and it makes it difficult for the borrower to pay the loan back in one payment. Once the lender has rolled over the loan to the following month he will add on the same amount of interest again. This makes the loan amount very high and is even more difficult for the borrower to pay back in one payment.
This scenario can carry on for another month and then the lender will want his money back immediately. By now the amount is way above the borrowerâs means and he cannot pay it. Many borrowers have reported to have filed for bankruptcy as they cannot afford to pay for this loan in one payment.
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