Fact vs. Fiction—The Truth About Payday Loans
As consumers continue to research alternative options in uncertain economic times, it’s inevitable that the myths about some financial tools will be disproved. The myths about payday loans are among these. Cash advance loans are often disparaged as a “last resort” in economic hard times. But in reality, they are an excellent solution for covering any unexpected expense. And let’s face it, financial emergencies happen in both good and bad times. Take a look at the five common questions about quick cash loans listed below. Arm yourself with the facts, and decide for yourself if a paycheck advance loan is the right financial tool for you.
Aren’t Cash Advance Loans for those who don’t qualify for any other type of loan?
Not necessarily. While it is true that these loans are available to those with bad credit, or no credit at all––those who might be denied a conventional loan or credit card offer––it is also a viable financial tool for those with perfect credit.
A paycheck advance loan is designed for small amounts of cash that can be repaid quickly. So anyone facing a short-term cash flow shortage could take advantage of a quick cash loan to get them through a financial tough spot.
Won’t applying for a Cash Advance Loan ruin my credit rating?
Applying for a quick cash loan will NOT ruin your credit rating. Cash advance lenders do not conduct credit searches, so applying for a loan will have not bearing on your rating. On the contrary, if you do have a damaged credit rating, applying for and paying off your quick-cash loan on time and according to the terms will help improve your overall credit history.
Don’t these loans come with high interest rates and hidden fees?
It’s true that these loans come with high interest rates. The nature of the loan requires this. Remember, your lender is not doing a credit search on you, nor is it requiring any collateral. They are taking a risk in lending you money without a thorough knowledge of your financial history. Higher risk equals higher rates. Also, because these loans are for short periods of time, the lender must make its money on your loan quickly, so higher interest rates are charged.
As far as “hidden” fees, it is your obligation as a consumer to read the contract you are signing. A lender has the right to charge you late fees or additional finance fees if you renew the loan. They should not, however, tack on extra, superfluous fees that have nothing to with the money you are borrowing. If you are not sure about the wording in a contract, ask questions. If you are not satisfied with the answers you receive, move on to a different lender.
Interest rates and fees vary by lender, so it is important that you read through your loan agreement thoroughly and that you understand all the terms you are obligated to fulfill.
Don’t people go into more and deeper debt when they start using these types of loans?
If used properly, you will be able to borrow the money you need, and pay it back within one or two pay periods. As long as you pay the loan back on time, you will not face additional fees, and should not incur any additional debt.
As with any other type of loan or line of credit, additional fees will apply if you pay late, or don’t pay the entire amount due on time. Doing so will result in additional fees and higher interest rates that could impair your ability to pay back the loan. These financial practices will get you deeper into debt, but the same can be said about a conventional loan or a credit card.
Isn’t the application process intrusive?
Not at all. In fact, a payday loan is one of the easiest types of loans to apply for. You will not be subjected to a credit check, nor will you be required to provide collateral. The only requirements are that you are employed and have a bank account.
When you apply, you’ll be asked to complete a short application form, to provide proof of employment, as well as a personal bank account number. If you can provide these, you are almost assured of being approved for a quick cash loan. As an added convenience, you get to do all of this from the comfort of your own home.