Payday loans are one of the most convenient loans that could be availed by anyone at anytime. However many people hesitate to lean toward payday loans in times of emergency because of various incorrect information and myths surrounding it.
Many potential borrowers simply stop short for fear of disqualification and most just believe that payday loan is a financial trap with absolutely no way out. Simply put; loans are what we make of them. We drag them, apply for rollover and keep using them for purposes not meant for loans. All the misuse and, ill-advised thinking leads to loans–not just payday, but all loans–to become a trap.
Following are some payday loan myths that we’ll debunk:
Myth#1: A payday loan is always used for emergency
Even though a payday loan is supposed to be used for emergencies only, it has been noticed that a wide number of people are using it for recurring expenses and sometimes even for lavish expenses. What makes this even worse is people utilizing it to pay other loans. When a loan is paid with another loan, it starts a cycle that will almost always end up in a deadly loan trap. It is not the payday loan that is trouble but the way it is used that causes trouble.
Myth#2: Payday loans are very expensive
Whenever payday loans are mentioned, they are always followed by an objection of its high annual rates. Truth of the matter is; payday loan is supposed to be only two-weeks long. That makes, the whole point of high annual rate moot since it is only utilize for some weeks, which makes the rate only 15% of the borrowed amount. The only time when it becomes too much to handle is when the borrowers apply for rollover again and again. It is not for no reason that payday loan is considered one of the most sought out alternative to other short term loans.
Myth#3: Payday loans are not related with banks
A payday loan is actually impossible to get without a bank account. The payday loan won’t get approved until the borrower proves the existence of a checking account and pay receipts. The amount is deducted from the borrower’s bank account.
Myth#4: It is a very risky loan
It is believed to be a risky loan for lenders because of borrower’s inability to pay, however the lenders get their payment with interest rates on the next payday of the borrower. The default rate for this loan is actually much less from any other kind of loan.
Myth#5: Payday loans exploit middle-working class
It is a commonly believed that payday loans target minorities and exploit people with low income; however, the opposite might be closer to the truth. Many times, it is the only alternative left for the working class to look for at times of cash emergencies. People with bad credit or those who have a difficult time accessing any other credit source have payday as their last resort.
Most of these myths prevent people in dire need of money to apply for payday loans. When unexpected expenses and emergencies occur, having some cash handy could save lives and prevent some great opportunities in life from being missed. Read more payday loans article by Quiddi Compare for more information.Read More