Why do People Borrow Instead of Cutting Down on Expenses?
Millions of people take out payday loans every year and more than half of them fall into debt. According to a survey, borrowers take out these loans because they believe that online lenders provide accurate information.
Even though borrowers find other loan options on the market, they grab payday loans because they are advertised as ‘safe’. Whereas claims like ‘affordable interest rates’ appeal to borrowers’ desires to get funds as immediately as possible, they find themselves unable to pay off. 12 month payday loans are a ray of hope to borrowers, who have realised that payday loans are highly exorbitant.
According to the survey, only 14% borrowers meet their regular expenses along with the payday loan and around 58% of them often struggle to deal with cash shortfalls. As a result, they opt for every option other than a payday loan to get rid of debt, for instance, borrowing from friends and family, selling worn-out assets and cash loans.
Majority of borrowers, who rely on these loans, are females and 25 to 45-years-old people. These people are categorised as follows:
- Home renters
- People who earn below £30,000 annually
- Undergraduate students
- Divorced and separated couples
Borrowers take out cash advances to meet regular expenses such as utilities, credit card bills, rent, car service, laptop repair, mortgage payments, food, and medical expenses. The survey also found that borrowers would cut down on food, drink, and ask friends for financial assistance if they did not apply for them. This brings forth an intriguing question why borrowers take out payday loans when they cannot afford them and figure out other ways to manage their finances.
Why people borrow despite unaffordability?
Many borrowers renew the loan and fall in a painful debt circle, but why do apply for payday loans when they cannot afford them?
Desperation – Borrowers find them in such a tight corner that they fail to suppress their desperation to get funds. In fact, some borrowers get ready to accept the offer on any terms and conditions.
Temptation – Featured with instant disbursal captivates as many borrowers as possible. They think these loans are easy to obtain.
Misleading terms – Some online lenders sell these loans at very high interest rates. Borrowers do not compare deals and grab the first offer.
No focus on total cost – Borrowers focus only on fees and interest rates but they fail to take into account the whole cost of the debt.
Coming onto the solution part, you have come to know payday loans are not as affordable as they seem. Chances are you struggle to manage your regular expenses despite opting for other favourable options, so what should you do?
Apply for 12 month payday loans.
These loans are much more affordable than instant payday loans because they are paid over a period of 12 months. Since you will pay off your debt in equal instalments, it will not cause you extreme burden. These loans come with amortising facility, which means your each regular payment will go toward both the principal and the interest. However, make sure that your lender provides these loans with amortising feature.
Since you do not have to pay back within a very short period, your lender will agree on lower interest rates. These loans can help you avoid rolling over the loan that is the most significant reason for throwing you in debt.
If you are unemployed, you should take out doorstep cash loans for unemployed. You do not need to have a functional bank account to apply for these loans. An agent will deliver you funds at your doorstep after considering your repayment capacity.
The final words
You should take out loans only if you can afford them. Borrowers apply for the loan regardless of their repayment capacity. Try to make a budget and cut back on your expenses.