It is hard to believe that during these times of economic hardship that people would still believe some myths about payday lenders. Many American families with middle wage earning capabilities have for some reason or another resorted to using payday lenders, yet that are some who have misconceptions about the business.
The Myth: Payday lenders are all very similar.
The Fact: Payday lenders are not similar at all. They may be similar in sense that they offer the same product, but the terms and conditions of the payday loans can vary widely. This is partly because many states have different regulations concerning payday loans and partly because this is a business with different companies competing against each other.
The Myth: Payday Lenders Deceive You
The Fact: The laws of the United States require payday lenders to disclose all the terms and conditions of the loans upfront. These terms may not be what you expect, nevertheless they are still readily available for you to read and agree to if you intend to take out a loan.
It is not in the best interest of a lending company to deceive their customers. Not only will they get in trouble with the law, but also they will definitely lose business to their competitors.
You will need to be aware that there are still unscrupulous payday lenders that do not follow the law and prey on individuals that are not aware or do not care to read the agreement that they are going into.
It is very important to make sure that a lending institution is legit prior to signing any agreement.
The Myth: Payday Lenders Charge Unreasonable Interest Rates
The Fact: The rates that payday lenders apply to payday loans may seem a bit high but they are very reasonable. Many states have even placed caps on the rates that these lending companies apply on payday loans to protect consumers. Even late penalties and additional rates for rollover loans are legitimate. If you do not want to end up paying additional interest rates then simply pay off the loan when it is due.
The Myth: Payday Lenders only cater to those with good credit standings.
The Facts: One of the risks that payday lenders have to deal with is that they do not check credit standings of any of their loan applicants. They do not care if you are in good or bad credit standings as long as you have the means to pay off the loan.
This is an advantage for those who have bad credit ratings because payday lenders are still willing to offer them a loan. However, abusing this system could end up complicated and it is highly probable that you will end up in a deeper hole than you were before you took out the loan.
The Myth: Payday lenders only offer loans for emergency purposes
The Facts: It is not a requirement for any payday lender to have the loan applicant disclose where the money is going to go. You can use the money for emergencies or a vacation. As long as you have the capability to pay the loan when it is due, then payday lenders will not care where or how you use the loan.
Given the fact that payday loans have higher interest rates than other loans, it would be wise to use them in an emergency. This however, is not a pre requisite when applying for a loan.
One of the biggest advantages of payday loans is that you will not have to face the burden of humiliation from borrowing money from a friend or a relative. A friend or relative may not charge you any interest rates, but owing them money may affect a relationship. The price of this alone may be higher than any interest rate available.
The truth about payday lenders is that they are there to help you when you need them, but they are also in business for them to make profit. The interest rate that they charge may be a bit high, but then they also carry the risk, not to mention any overhead cost of running a business.
The best way to handle any loan is to do it responsibly. Always make sure that you are capable of paying back the loan amount and interest, and that you can do that on or before the loan is due.
It is possible to rollover a loan past the due date but then you can expect that there will be additional interest. This is only normal for any type of loan. If you can accept these additional interest rates or penalties then you can rollover the loan if you really need to.
Payday lenders offer a means for people to get extra cash when they need to. Lending companies disclose their policies upfront and they are bound to follow the laws. If you can be responsible enough to pay off a loan on the due date then you will not run into any complications. In fact, some companies even offer discounts if a loan is paid off early or on time.
Knowing that payday lenders are in fact a legitimate business does not mean that you can approach any payday lenders of your choice. You will still need to make sure that the company is legit and has the authority to operate in your location.