The nasty cycle of high-interest rate loans

Many of us had started from the bottom, working day and nights, and depending on government assistance to pull them through. Many individuals and families are stuck in a vicious cycle unable to break free of their chains. If you are stuck in this situation right now, it is crucial to learn the mistakes other low-income individuals have made and try to avoid them. Not only avoid them but to also improve your money mistakes.

You may be wondering what is causing these people to be stuck in the low-income bracket? The main culprit is your community Payday Loans centres and pawnbrokers. Although there may not be many payday loans in Ireland, they have grown to have a bad reputation in the UK already.

Debt never sounds good, but there are the good and bad. Of course, if an individual is investing in a new restaurant or new company there will start off with debt. With time they can potentially pay it off and earn more from the situation.  But in this case, hearing high interest is one of the first major red flags.

The reality is a lot of low-income earners are not making enough to get through there day to day expenses. Everyone has things that are necessary like living and eating expenses but what do you do when you cannot afford them? There is always a time where you may need to borrow some money to bridge the gap for what you need financially to afford the things you need and the things you want. But borrowing at a high-interest rate is very risky.

The majority of the time high-interest rate debt compounds exponentially over time. The longer you take to pay back the more you need to pay back in interest fees. In this case, cut out all the wants you have and focus closer on the things you need essentially to live. Living off the basic essentials may be the case for people to avoid a long term unhealthy financial relationship. Many of these stores strategically place their location in low-income areas. This can cause people to be stuck in vicious cycles. At all costs avoid a high-interest rate loan for it can haunt you down for a long time.

As mentioned previously these payday loans have already gotten a bad name in the UK. Although Ireland may not have many of those, if these stores start trapping these low-income individuals Ireland could be stuck in the same trap as the UK.

Understanding what you absolutely need to live versus your wants can help avoid uninviting expenses. Avoided high-interest rate debts are key to avoiding a nasty cycle of debt for the future and teaching others before they fall into the same trap as well. 

 

Lucas Zhang was a Finance major at Ohio State University. He writes about finance, mortgages, and technology for Irish Mortgage Brokers. 

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