Bad things happen to the best of us, and when money is tight, it can be tempting to go get a no-credit loan like a payday loan.
Imagine this. It's Monday night and you notice the fridge doesn’t run cold anymore so the food you have is going bad. You can’t wait five days to get a new one.
The washing machine and dryer went caput at the same time. If you didn’t have to work 10 hours a day you could wash everything by hand, but even then, you don’t have 1,000 dollars to spare.
Little Tim’s mattress has a horrible hole, and a rogue spring makes it impossible for him to sleep.
It happens to all of us. Something comes up and the budget is tight. We’re still 5 days away from the next paycheck, and we’re left wondering what we should do. Bad situations come up at the worst of times and it can be tempting to go get a no-credit loan like a payday loan.
So what’s the problem with payday loans anyway?
Well, the main issue is the exorbitant fees that they charge, often 15-30 dollars for every $100 borrowed. Even on the low end $15 per $100 borrowed ends up being close to 400% APR. Erica Sanberg, a writer for USNews.com put it very clearly:
“Principal loan amount: $400
Interest amount/finance charge: $60
Repayment term: 14 days
- Divide the interest/finance charge by the loan principal: $60 / $400 = 0.15
- Multiply the result by 365, for the number of days in a year: 0.15 x 365 = 54.75
- Divide that result by the length of the repayment term: 54.75 / 14 days = 3.910
- Convert into APR by moving the decimal point two spaces to the right: 391 percent APR” (https://loans.usnews.com/everything-you-need-to-know-about-payday-loans).
Then, when it comes time to pay off the payday loan, you're at the end of the pay period and you can't pay it in full. People often roll over the debt into the next pay period, acquiring an additional set of fees equal to, or greater than the original set of fees. If your pay periods are 14 days, you will already have accrued $120 in fees in the span of a single month. All for taking out a payday loan of $400. If the fees at your particular payday loan establishment end up being $30 per $100, then you’re really in trouble.
But there are other options that you might not know about.
A More Affordable Alternative to Payday Loans
If your scenario is similar to what we imagined earlier in this post, a lease-to-own option like Kornerstone Living should be something you look into.
Kornerstone provides a no-credit lease that gives you the full terms upfront, with no hidden fees or accruing interest. If you purchase a new set of tires or furniture, Kornerstone will draft up a lease-to-own contract for a one-year term. The contract will show you the total and final amount expected of you during that term. When you sign the agreement you are agreeing to pay that amount in full. The good news is, if you make the minimum monthly payments on time, you will pay them off without additional fees. You know you will pay the amount on your contract and then you are done.
But even better than that, Kornerstone offers discounts for paying off early. Our most popular discount is the 90-day buyout option. If you make your minimum payments on time and pay them off in 90 days, Kornerstone will waive almost all fees to leave you with a low-cost lease. Even after the 90-day period, there are opportunities to discount your lease if you pay off early.
Our lease-to-own programs are available through many retail locations. If you find a retailer that is partnered with Kornerstone Living, please call us to inquire about your specific lease terms so you can be informed about all the details. The information in this blog is meant as an example and specific contracts will vary based on product, amount leased, and location. We want to be fully transparent so once again, please call and we will explain everything.
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