There are many myths surrounding the payday lending industry. To help US consumers tell facts from fiction, we have compiled a list of the 5 most widespread myths and unveile the truth beneath the fiction.
1. Payday loans are very expensive; lenders charge exorbitant interest rates.
Yes, the interest rates are, indeed, high. In the states where usury laws are not in place, APR might reach as high as 400-1500%, when compared to personal loans and other types of loans given by banks.
However, when taking out a quick cash loan, consumers should understand that these payday loans are short-term cash advances. They cannot be extended over the set period or rolled over many times, meaning that consumers will not have to pay excessive interest charges.
On top of that, many states limit the maximum APR that payday lenders can charge.
2. The payday lending industry is unregulated.
This is not true. Each state has its own set of regulations applicable to payday lending. Some states prohibit this type of loans, others introduce caps on the maximum APR lenders can charge, etc. Moreover, there is a large number of organizations that protect consumers’ rights.
3. Cash advance lenders charge hidden fees and use misleading practices.
Due to the local regulations in place in all states, quick cash loans are considered to be the most transparent type of loans available on the market. Lenders are required to disclose the terms of the loan in the lending agreement. Borrowers unable to understand the loan terms are welcome to seek help from consumer organizations and to request educational brochures from their lenders.
4. Applying for a Payday Loan is Difficult.
Different lenders have different requirements for borrowers. Typically, all that borrowers need to do is fill in an application and wait for it to be reviewed. Most lenders do not run credit checks because they are not required to do so. But, as long as long as the borrower is 18 years old, employed, has an active checking account and good credit standing, they will be approved.
Borrowers with poor credit history can apply for a bad credit loan. Those who do not want to deal with paperwork can opt to apply for a payday loan online.
5. Your personal financial information is not safe with payday lenders.
As long as you get a loan from a payday lender that is certified or accredited by one of the government’s organizations, your personal information is secure. Legal payday lenders guarantee safety and confidentiality to their customers.