Nobody wants to find themselves in a position where they have no other option but payday loan lenders. Unfortunately, many people are unaware of the financial risks that come with turning to these lenders for help. That’s why it’s important to understand how debt spirals can start when you borrow from payday loans, and how RadCred can provide an alternative source of emergency funding without the high interest charges or hidden fees.

What is a Debt Spiral?

A debt spiral occurs when someone takes out a loan or credit line, but fails to make payments on time – or at all. When this happens, the lender will add late payment charges and/or interest onto their account balance. This makes the amount owed increase significantly over time and leads to further difficulties in repaying the loan or credit line. As a result, the person can quickly become trapped in an ever-growing cycle of debt – hence why it is referred to as a ‘debt spiral’.

Payday Loans and Debt Spirals

Payday loans are particularly risky because they offer short-term borrowing with very high interest rates. This means that even if you manage to repay what you owe on time, you may still end up paying much more than you had initially expected due to accrued interest payments. However, if you fail to make payments on time (or miss them altogether) then this could lead quickly into a debt spiral where your balance continues increasing until it reaches unmanageable levels – further compounding your problems by adding yet more expensive late payment fees onto your balance each month.

High interest rates and fees

Another problem with payday lenders is that they often charge exorbitant interest rates and hidden fees that trap borrowers in a spiral of debt without them even realising it. For example, some lenders may charge processing fees for taking out a loan, or additional monthly maintenance fees once the loan is taken out – both of which are additional costs that must be paid back along with the original principal amount borrowed. Furthermore, as these types of lenders operate outside of traditional banking regulations, there is no one to protect borrowers from excessive fees – meaning that debt spirals can get worse very quickly if not carefully managed by the borrower themselves.

RadCred: An alternative source of funding

RadCred offers an alternative source of emergency funding to traditional payday lenders such as banks and credit unions, which typically offer lower interest rates and longer repayment terms than most payday lenders today. We strive to create greater financial stability for our customers by providing access to capital without hidden fees or excessive APRs. We also offer personalised advice from our team of experts so that borrowers know exactly how best to manage their finances in times of hardship or uncertainty to keep their financial situation under control – something that’s not typically offered by payday lenders today.

Avoiding the debt spiral

The key takeaway here is that it’s important not only to check different sources before taking out a loan, but also to ensure proper management once it’s been taken out, in order to avoid becoming stuck in a never-ending cycle of debt caused by rising debts as well as late payment penalties incurred when failing to meet repayment deadlines set by lenders. In addition, alternatives such as RadCred should always be considered as they offer lower cost options than most traditional banks whilst offering personalised advice on managing funds during difficult times – helping people stay financially afloat while avoiding the costly debt traps caused by irresponsible online borrowing practices today.