Payday loans can be a great source of fund during emergencies such as rent payment, medical bills, car breakdown, etc. However, payday loans have gained a bad reputation as being used by loan sharks who prey on the weak. Hence, people are skeptical about taking payday loans for unexpected expenses.
Presented below are 4 myths about payday loans, which will help dispel any qualms or misconceptions that you may have about payday loans
1-It is very difficult to repay payday loans: It is believed that payday loans are almost impossible to repay as the principal, fees, late payment charges, and other charges keep adding up, which in turn keep that borrowers indebted for a long time. This belief is a myth as borrowers are informed of all details of the process of taking a payday loan and the repayment structure along with varied fees, etc., at the time of taking out the loan. Thus, borrowers are aware of exactly what they are getting into and how the loan can be repaid. No payday loan lender will force people to take the loan at the time of application or otherwise. Borrowers need to remember that it is quite easy to repay payday loans when they select the correct repayment option that is suitable to their financial status.
2-Interest rate for payday loans is extremely high: This is the most widespread misconception about payday loans. The interest rate is of prime concern to borrowers whenever they take out any kind of loan or credit. It may be noted that payday loans interest rate or APR is usually lower than that of credit card interest rates. Cash advances taken with credit cards carries penalties and overdraft fees, etc., if the advance is not repaid within a stipulated period. Thus, if cash is withdrawn for emergency purposes from your credit card, then it is essential to ensure that the advance is repaid within the due date. In case of payday loans, borrowers can opt for the repayment tenure and structure that is viable for them. Thus, payday loans offer immediate funds for emergencies with a repayment plan specifically mentioned in the loan agreement. The interest rate on payday loans is affordable as it helps tide over financial emergencies
3-Payday loan lenders tend to target susceptible borrowers:Another myth about payday loans is that it targets households with low income and vulnerable individuals. It is important to note that payday loans are available for all, irrespective of the credit score, income, financial status, or location of a borrower. Payday loans are specifically designed to help ALL individuals get access to emergency funds for a short period of time.
4-Payday loans are only for people with financial problems: There is an incorrect belief that payday loans are taken out by individuals in financial distress, i.e., broke or poor people. This is a myth. Payday loans are designed to be a source of immediate funds for everyone who is in need of emergency cash. It may be noted that most of the borrowers of payday loans are financially stable, middle-class people and not just the poor or broke.