Payday loans have emerged as a preferable loan option for those who need cash in emergency without going through a lot of hassles and paperwork. You can avail this loan against your paycheck and need not go through credit checks by the lender. All this comes with the obligation to repay the loan by the next pay day or within a stipulated period of time agreed upon with the lender. One thing that makes payday loan a little dicey is the fact that it is subjected to considerably higher interest rates in comparison to the conventional bank loans. This is the reason that there are some myths and misconceptions related to these loans. Moreover, lenders have been using some unfair practices over the years, which have further influenced the reputation of payday loans. However, this concept still remains popular for providing fast cash in a convenient manner. Let’s debunk the top payday loan myths for you.
- Meant to rip off the borrowers
To start with, the biggest myth attached to these loans is that they are just meant to rip off the borrowers who need instant cash. Yes, they do charge a higher rate of interest but that is a small price to pay considering the fact that they come to your rescue instantly when needed. In fact, they serve as the best short term loan option to fulfill emergency needs, provided that you are in a position to repay in time. The penalty, however, can be exorbitant if you default or miss the repayment date.
- Have hidden fees and conditions
Payday loans are often regarded as a deceptive option as they are believed to be tied with hidden costs, fees and conditions. Lenders may come up with additional charges apart from the original conditions once the loan has been granted. The truth behind this misconception is that this industry too is regulated and borrowers need to mention all the terms and conditions clearly in the contract. It is the lender’s obligation to go through them thoroughly rather than coming up with the complaints that they are being misled.
- Beneficial for the lenders only
Another common myth about payday loans is that they are meant to bring benefits for the lenders only, considering the high rates of interest that they charge. Conversely, these loans are equally beneficial for the borrowers too as they come to their rescue in emergencies. They fetch you fast cash in LA and anywhere in the US because you can apply for them online and get the approval within only 24 hours. There are no formalities such as collateral or credit checks and paperwork is almost minimal.
- Lenders coerce borrowers for collections
This is one of the biggest misconceptions that give payday loans a seriously bad reputation. Yes, lenders do use aggressive marketing tactics but that is just a part of the business. There is no truth in the claim that they use forceful and coercive measures to collect dues from the borrowers. They can penalize the ones who fail to repay in time but this is done in a fair and lawful manner. Moreover, regulatory authorities can step in to ensure that the there are adequate measures to protect the borrowers against unlawful lending and loan recovery practices.
- Apt for people with serious financial crisis
Another payday loan myth is that it is only apt for people facing serious financial crisis. However, this myth too needs to be debunked as this kind of lending is meant for addressing financial emergencies rather than long-term crisis. If you are keen on taking this kind of loan, you should be very sure that you will be able to repay it by the next pay day. Statistics indicate that this loan is popular amongst the salaried class and middle class people who need funds for short term and are able to repay them within a few weeks.
Since there are several myths that spell doom for borrowers, people are forced to think that they should better stay away from payday loans. At the same time, there is still big demand for them as they are easy to avail and provide timely assistance when there is an emergency. One thing that you should be very sure about is your repayment capacity so that you are not penalized for the inability to repay in time. Payday loans make a good short term loan option provided that they are availed wisely with a genuine reason and also are repaid on time.