High-interest loans, such as payday loans or certain personal loans, can trap borrowers in a cycle of debt. While they provide quick cash, the costs are staggering. Annual percentage rates (APRs) often exceed 100%, meaning a small loan can double or triple in cost within months.
Borrowers often find themselves unable to pay back the full balance, leading to rollovers or new loans. This creates a snowball effect that becomes difficult to escape.
High-interest debt doesn’t just cost money—it limits financial opportunities. Funds that could go toward savings, investments, or debt reduction are instead consumed by fees and interest.
The best defense is prevention. Before taking out a high-interest loan, explore alternatives like credit union loans, personal lines of credit, or even borrowing from friends and family. Building an emergency fund is the most effective long-term protection.
High-interest loans are financial quicksand. Avoiding them—or escaping them quickly—protects your financial stability and keeps you on track toward long-term goals.
