Debunking the most common misconceptions about payday loans
The fallacies are out there, circling around and bringing down the name of payday loans and lenders – when in truth, payday loans aren’t as harmful as they’ve been made to seem. Being responsible about payday loans and making sure you’re educated and able to handle them is key. We gathered the top five myths about payday loans and set the record straight.
1. Payday loans are only for those who are struggling/poor
The facts are that, statistically, the most common individuals seeking payday loans are middle class people with full time, salaried jobs who happen to have an emergency or other pressing situation arise where they need the funds quickly but don’t have the money on hand right then. Lenders typically require that proof of income and an active bank account are given before they allow potential borrowers to loan. Payday loans are intended to be used to cover issues that arise between paychecks.
2. Payday lenders charge high interest rates to make massive profits
The truth is that payday loans are expensive to administer. Payday lenders must account for costs of defaulted loans and running a business as well, like paying bills that come with using a building and providing income to staff. It’s important to remember that lenders are providing you with a service – it makes sense to have to pay some kind of fee to use it. Recent studies by the Buckeye Institute have proven that the average profit margin for payday lenders is only 3.57%.
This isn’t just false – it’s also illegal. The Truth in Lending Act requires lenders by law to be upfront and forthcoming with their fees. This means the fees must be outlined in the lending agreement. There will only be one flat fee – no hidden fees or added interest. Additional fees may occur when a customer defaults on their loan, but all that information is put into the loan documents. Also, customers may be able to speak with a representative to remove that fee for a timely payment. Make sure to thoroughly read the lending agreement if you do take out a payday loan. All information about the fees will be there for you to understand.
4. You must have good credit to be eligible for a loan
You don’t need an excellent credit score to be able to take out a payday loan. Most lenders don’t even check your credit, meaning you could even have no credit and still be eligible. If you’re bringing in income and using a bank account, you should be good to go. Payday lenders are only concerned about whether you can afford to pay the loan back now – your credit history plays no part in this.
5. It’s cheaper to just pay overdraft fees
Typically, a payday loan fee is a onetime fee calculated per $100 the customer is borrowing. Overdraft fees range from $30-$54 per overdraft. On top of that, overdraft fees can be applied to your bank account without notification when the overdraft occurs. Payday lenders are open and honest about their fees. Taking out a payday loan is considerably less expensive if you know you need money that you don’t have – this also means you’ll avoid overdraft marks on your bank statement.
Payday lenders aren’t built to get you – they’re built to help you. Although you shouldn’t resort to using payday loans regularly, using them when you really need them won’t ruin your financial situation. Instead, having the option for payday loans means that when you’re in an unexpected predicament, you can rest easy knowing you can take care of the problem. Just be smart!
If it’s time for you to get a payday loan, check out our payday loan offerings. We’re a direct lender and we offer fast, secure payday loans in California, Texas, and Kansas. We offer same-day approval ,free due date extensions, and much more to make the process as easy as possible.