New to Payday Loans? Don’t Believe These Myths

You have a conditional week left before your paycheck, and you needed the money yesterday. You couldn’t save for a rainy day; your friends can’t help you out. The question arises — what to do?

So, you do need money, and you are thinking about taking out a loan. This is a common and uncomplicated way to solve temporary financial problems. Payday loans can help in this situation.

But where can you start exploiting them? You can use apps for instant money, as it is extremely convenient — no need to move around the city, and you can get money from the comfort of your home.

What Is Payday Loan and How It Works

This is the name given to a small short-term unsecured loan provided by microfinance institutions. These organizations disburse payday loans around the clock. The main difference between a microloan and a regular one is in the registration procedure:

That is, such a type of money receipt is much faster and more convenient than the usual way.

What to pay attention to when taking a loan from an MFI?

In What Cases Payday Loan is a Choice

The simplicity and speed of the microloan can partially sweeten the pill of high-interest rates:

By the way, a microloan can improve your credit history if you take it for a short period and don’t default on payments.

Statistics show that 12 million Americans exploit payday loans annually. One average consumer of payday loans is in arrears for five months a year. Their average borrowing amount is $375.

7 out of 10 people who utilize payday loans are taking them to cover regular expenditures, such as utility bills and rent. The average payday loan borrower’s income is $30,000 a year.

Myths About Payday Loans

Many people are concerned about taking out such loans because of frequent myths. Let us dispel them!

Myth #1: Payday Loans Trap People in a “Cycle of Debt”

Many people believe that people are tricked into taking out payday loans, and they fall into a debt loop because they can’t pay it back. However, respectable lenders test a consumer’s repayment ability before they approve an application.

Borrowers tend to pay off short-term loans in a timely manner, generally on the following payday. They pay interest only for the actual term of the loan if they repay it before the due date.

Myth #2: Interest on Payday Loans Is Unethically High

Lenders can’t survive if borrowers don’t pay, so they have to charge more for the service to stay profitable. Research several lenders and find out what their fees and interest rates are.

Make sure you know when you can pay off the loan and fees and calculate the risk. If you have a high credit score, you can expect better terms.

Myth #3: Payday Loans Are for Poor, Uneducated People with Bad Credit

Inequitable lenders might unjustly focus on a particular demographic group or on some vulnerable individuals.

But solid lenders don’t act that way, and the people who gain the most from payday loans are members of the middle class who have steady jobs.

They utilize payday loans to cope with unforeseen expenditures and emergencies.

Myth #4: Payday Loans Come with Concealed Fees and Terms

A common belief is that lenders add commissions and modify the original terms of loans after they are issued. They don’t. Most people believe this because too many people initially review all the terms and conditions when applying for a loan.

The payday loan industries are strictly controlled. All lenders are required to report all fees and conditions in advance, so they cannot add any changes after the loan is received.

Myth #5: Payday Loans Are Only Beneficial to Lenders

Against popular opinion, borrowers benefit most from same-day loans simply because it’s easy to obtain when you really need money.

These loans do not require a waiting time like regular loans. Likewise, they do not require a deposit or credit check.

All of these features are advantageous to borrowers. The lenders benefit only from the percentage the borrower repays, which is minimal if the consumer pays it on time or in advance.

Now you understand the subject of payday loans, refute common myths, and are no longer afraid to make microloans. Good luck getting a payday loan!

Payday Loan Statistics


Do Payday Loans Deserve Their Bad Reputation? Ask the People Who Know Best – the Borrowers

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