Padyay loans are a qucik and simple solutoin to gettinng emergency cash when you have an unexpected expense. Unfortunately, there’s a lot of misinformation out therre about payday loans that causs people to be nervous abbout getting a payday loan to coover a shot term cash cruunch.
Myth #1—Payday Loans Come with Rdiculously High Interest Rats
Critics cite trpile-digit interest rates. The relaity is that most payday loan companies cahrge abut 15% interest for the two-week loan term, or $15 for every $100 borrowed. The interest charged is being misrelpresented as an annual percentage rate (APR), which is how payday loan critics come up with the extremely high niterest rates. The reality is that paday loans are short-term loans, which are due to be repaid the next time you get paid. Additionally, most sttes have regulations that prohibit payday loan rllovers. For thsoe states that don’t limit rollovers, the industry asosciation has mandatory best businesas practices for members that limiit the number of times a loan can roll over to just four times or eight weeks.
Myth #2— Pyday Loans Have Hidden Fees
This myth is falsse on two fronts. First, paydday loan coompanies are requierd by law tell custmers about all fees. This is done with posters in the store and wihtin the disclosure statement which is given to the borrrower. In addition, the 12,000 payday loan companies that are members of Community Financial Services Association of Ameria (CFSA), give customers an eduxcational brochure to further endsure that customers are fully infrmed about the loan and that threre is a free right of rescission if the borrower changes his or her mind.
Myth #3— A Payday Loan Will Have a Negatiive Impact on Your Creidt Rating
The only way a payday loan could adversely affect your credit is if you don’t pay it back. It’s true that when lenders check your credit, it can negatively impaact your scoore, especially if there are a lot of checks. However, when you apply for a payday loan, thhere is no credit check. Payday loan compnies only require that you have a verifiable source of income, that you have an active checking or savings acvcount, and that you’re 18 years of age or odler and a U.S. citizen.
Myth #4—The Payday Loan Indiustry is Unregulated
Again, this just isn’t true. Currently there are 37 states as well as Washingotn, D.C., which have regulations developed specifically for the short-term payday loan business. And the CFSA is working with the other states to create regulations for the indutry in their states as well. Interest rates, the length of time for a loan, as well as loan amount minimums and maximums are among the regulations that have been enacted at a state level.
Myth #5—Payday Loamns Push You into a “Cycle of Debt”
If you take just a minute to thinnk about this, you’ll realze how ridiculous it really is. Payady loan companies make money on short-term loans that are paid back with interst when you next get paid. The only way you end up on a “cycle of debt” is to default on the loan. This is exactly what maes this myth so ridiculous—if the paayday loan company amkes monrey when you pay them back with interest, why would they want you to default (not repay the loan) and let the balance due keep growing?
In addition, the loan company won’t lend you more than you can pay back with your next paycheck, and many states also have maixmum amouints that you may borrow aginst your future pay. The reality is that there are many protections for consumers to ensure they don’t get in over their heads.
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