The Myths Floating Around Payday Loan
By now everyone is aware about the various controversies that surround pay day loans. Here in this article we have tried to debunk some of the greatest myths floating around about this loan.
The term payday loan is not always taken on a positive note. A lot of people still have several common misunderstandings about how a payday loans and many of them are also scared of this loan. But on the contrary, a payday loan can be really helpful if used the right way.
The number of myths that you may have heard for years about a payday loan is not completely false. But before you believe them you should first know what exactly a payday loan is, how it works and when you should really consider applying for it.
A payday loan is a small amount loan. By applying for this loan you can borrow just a few hundred dollars. They are lent at varying levels of interest rates, which vastly depend on the borrower and lender. Generally, in most of the pay day loan agreements the borrower agrees to pay back the loan as soon as they receive their next paycheck.
A payday loan is often considered to be the most sought after solution by anyone who finds themselves in a tight spot all of a sudden. This loan can be usually taken out on the same day a borrower applies for it.
There are several situations when a person can apply for a payday loan. But before you apply you should have a solid plan for repaying back the borrowed amount. You can also opt for this loan when you do not want an inquiry on your credit history, you will be in more debt and applying for a payday loan is the only solution, facing emergency need, and need a small loan temporarily.
Now that you know what a payday loan is, let us check out some of the biggest myths that prevent people from applying for it. There are various companies that are not completely trustworthy. Therefore, ahead of taking a decision make sure that you research about the company you are interested in.
Another major myth is that all pay day loan companies are frauds. It cannot be denied that fake companies exist. But there are also several pay day loan companies that are 100% legal and legitimate. The next myth is that payday loans are complicated, which is a completely false statement. On the contrary, payday loans have extremely simple transactions and are absolutely easy to apply for. Since these loans are short term loans, lenders have little to do in order to determine the eligibility of a borrower.
Most of the borrowers simply have to confirm about employment, should receive regular paychecks and have an active checking account to get a pay day loan. These loans also do not require intense credit checks or lengthy paperwork. All this makes the process of applying and walking out with a pay day loan short and simple. As a matter of fact, a pay day loan transaction can be completed in just fifteen minutes.
Another major myth is that payday loans have high interest rates and APRs. The APR of a payday loan can be up to 391%. It is definitely a high interest rate. However, compared to the length of the loan term it is short compared to other type of loans. When compared with the fees surrounding bounced checks, late mortgages, overdraft charges, or late credit card payments, the interest rate of a payday loan is often less.
Many people think that a payday loan can never be paid off, which is another common myth involving this loan. The fact is that borrowers who are irresponsible and continue to roll over their pay day loans frequently are never going to be able to pay off their loan. Thus, many lenders have today limited rollovers.
Another false statement made against payday loan is that only poor people borrow this loan. It is not true. Emergencies can happen to anyone, regardless of what your financial standing is. Taking out a payday loan should not be considered as a disgraceful act. Getting a payday loan and repaying it back on time could be the smartest move to make.