Most Common Myths About Payday Loans
Many people are afraid of payday loan organizations taking advantage of their situation for one reason or another. This opinion is due to the fact that there are many existing myths that do not correspond to reality yet manage to ruin the payday loans’ reputation. Let’s take a look at those misconceptions in more detail and try to dispel each one.
High Interest Rates
A common myth is that payday loans’ interest rates are completely unaffordable. Of course, the indicator will turn out to be higher than that of banks since there is a high risk of non-return. However, it is not the right approach to compare the rates of banks and payday loans: consumer loans are typically given for a period of more than a year, while the latter type is given for a shorter time frame.
The Borrower Falls into a Money Pit
This myth is directly connected with the previous one. Most people believe that high interest rates will result in an unimaginable amount of debt that will be impossible to cover for years and years to come. However, it is not any close to the real state of things. In fact, payday loan clients often manage to avoid bigger debts and resolve unexpected issues and return the borrowed amount on time.
The Brutality of the Collectors
A lot of people who consider taking out loans think about what could happen if they would not be able to pay the debt back. Some expect bailiffs to be involved in the debt-collection procedure or imagine endless phone calls 24/7. In fact, in case of delayed payments, payday loan companies often turn to third-party collector agencies. Those organizations will only follow legal procedures when it comes to debt collection, so there is nothing to be suspicious about.
Payday Loans are Issued to Everyone
While it is rather easy to get a payday loan approved, some applicants get denied. Here are some reasons why a lender may not be able to receive a payday loan:
- under 18 years of age
- not being able to prove the income
- having outstanding loans
- making payments to gambling sites
- absence of a checking account
Only Financially Illiterate People Turn to Payday Loans
Financial literacy is not about avoiding taking out loans but rather about doing it in a thought-through manner. Therefore, most clients who turn to payday loan companies are financially literate people, as they understand that a fast loan will help them find a solution for a situation they are facing.
The Loans Are for Short Periods Only
While some payday loan providers specialize in short-term lending, other companies provide a bigger timeframe. Besides, if you are a regular client with a good history of borrowing and returning money, you can often count on larger loan amounts and longer deadlines. Such conditions make payday loans more similar to consumer loans yet faster and simpler to receive.