There are several misconceptions about payday loans that can make them seem like an intimidating concept to some. The reality is that payday loans can be a helpful option for those who find themselves in an unexpected financial crisis, but don’t have the savings on hand to cover it. Keep reading to learn the truth behind some common payday loan myths.
MYTH: Payday Loan Companies Take Advantage of Low-Income Consumers
Those lobbying against payday loans may claim that these lenders are taking advantage of the most vulnerable part of the population. However, the reality is that payday loan companies provide a valuable service and are often the only viable solution for those facing unexpected short-term expenses. For example, when faced with an unexpected medical emergency, some may face the difficult choice of seeking medical attention or feeding their family. A payday loan can provide relief in this type of situation, allowing you to get back on your feet.
MYTH: Payday Lenders Try to Target People Who Cannot Pay
A quick internet search for “payday loan places near me,” may return information about questionable lending practices of targeting people who cannot afford their services. The reality is that this is simply bad business, and a practice that no lender should follow. Legitimate lenders are transparent with their terms and loan requirements, and do not lend to people who are not qualified. The cost and hassle of trying to get funds back is not worth it, so it is much better business to lend to someone who is able to pay it back.
MYTH: The High APR Makes Payday Loans Unfair
The APR attached to an online payday loan might seem high, but it does not give you an accurate picture of fees associated with the loan. While fees tend to be higher than compared to conventional mortgages or car loan rates, they are intended to be short-term and are usually for smaller amounts of money. Since they are not intended to be paid off over a long-term basis, the fee structure should not be compared with that of a long-term loan.
MYTH: Payday Loan Companies Use Dishonest Tactics to Trick You
The idea that payday loan companies are tricking innocent consumers with dishonest practices or fine print is often untrue. Just like other financial institutions, payday loan companies are regulated heavily by the Consumer Bill of Rights, CFSA Best Practices, and The Fair Debt Collection Practices Act. As long as you take the time to carefully read the terms of your loan, you should never be surprised by late fees or demands for repayment.
While payday loans are not intended to be used for casual day-to-day expenses, they can be very useful in an unexpected financial emergency. Now that you can separate fact from fiction, you can better assess if a payday loan is the right option for you.