Who doesn’t love instant cash when the landlord is troubling you for the rent or at times you come across some emergency towards the end of the month when you’re out of cash. Payday loans seem a feel like an angel in disguise with a blessing of cash at the right moment. Pay day loan service providers are regulated by strict rules introduced by the law, yet people fail to trust them. There are ethical and unethical payday loan service providers and previous unwanted incidents related to loans for paydays might be the reason for the wrong impression people have regarding payday loans.
There are myths prevailing amongst people related to payday loans that make it more difficult for them to serve the people properly. Today we took the time out to bust the myths and shed some light on the truth associated with payday loans and payday service providers.
1Myth 1: Payday loans are expensive and have a high annual rate of interest
Payday loans are expensive and have a high rate of interest, which is frankly not the truth. Payday loans are for a shorter period, probably for two weeks, not for a year or so. The truth is payday loan lenders charge an approximate of 15% for a two-week loan and it turns out to be expensive if the loan is rolled over continuously for a year, which is 26 times of the specified time. Also, the state regulations don’t permit this many rollovers.
2Myth 2: Payday loans lead to a “cycle of debt.”:
Okay, this myth is completely invalid as the permissible rollovers are restricted to 8 weeks and that is just 4 times of the actually given time period. The debt has to be paid within 8 weeks, hence the cycle of debt is not possible unless even the interest of 8 weeks seems huge.
3Myth 3: Payday loan lenders charge unfair from Seniors and minors:
The fact that only hard working people opt for payday loans who earn more than $25, 000 annually. Also, only 4 percent of payday loan consumers are using payday services are above 65 and can be classified as senior citizens. The rest of the payday loan consumers are below 45 years of age and are employed on high wages positions. Also, when someone requests for a payday loan, the required documents to qualify for the loan consists of a mandatory checking account and a stable income source.
4Myth 4: Payday loan lenders want to avoid regulations:
The Payday loan lending industry is a regulated industry and the Community Financial Services Association (CFSA) has strict rules that restrict any kind of misleading and fraud by the lenders. Also, the consumers should read the standard regulation before applying for a payday loan to avoid chances of fraud. ‘Better be safe than sorry’ isn’t it? Hence, with just a little bit of pre-application research and precautionary consultation, any fraud can be avoided. Moreover, payday loan lending is currently regulated in 34 states of USA. And, the plan is to implement the regulation in all 50 US states.