Are Cash Loans Really Rip-Offs? 10 Myths About PayDay Loans You Need To Know
Payday loans have become really popular in the recent economic scenario, what with the promises of instant payment and the benefits of sure shot lending overshadowing the many drawbacks that it might entail potentially. No doubt, such lending is quite useful to those who need it in a crisis and might also lead to alleviation from immediate troubles. But it must be kept in mind that such advances need to be repaid as soon as possible or one might have to face highly inflated interest rates which become quite unrealistic in a short duration and therefore, getting out of debt becomes a unfortunate scenario.
Top 10 myths surrounding payday loans have been accumulated here, so that we can discuss the reality about them:
1. Elongated debt trap
There is this misconception that payday loans are always aimed at luring people into a debt trap. It cannot be farther from the truth. In reality, it is as simple and straightforward as can be expected. The terms have been laid out in front of you. You borrow and try to pay back all of it at your earliest convenience. Most lenders agree to a payback period ranging from fifteen days to a month, subject to terms and conditions specified.
2. Preying on medium wealth demographic
Loan sharks do exist in the modern world. But it is not always that you would encounter such unpleasant characters. After all, no one wants to give their business a bad name in the market for the sake of short term growth. It is an industry and lenders realize that growth is synonymous with trustworthy business ethics and operational practices.
3. Concealed Charges
Every payment term is required to be mentioned in the agreement being signed by you. It is your responsibility and right as an adult entering into a financial agreement to be able to comprehend the conditions implied. If something seems fishy, you can always take your business to another lender and negotiate a contract which is lucid and clarifies any charges in totality.
4. Shark lure practices
No lender worth his salt would ever implement a debt trap. First, it is harmful to the business and the lender’s standing. Second, it does not bring about expected returns and is a disruption in the daily business environment.
5. Lawsuit trap
People surmise that lenders aim to trick those individuals who can never pay back the loan on time and then go after them with lawsuits. Well, lawsuits cost money and no business wants to slice off a layer of their profits as expenses towards lawsuits that may or may not be fruitful.
6. Shady reputation
Payday loans are not illegal and there are several branches and outfits that are well established and fulfill all the legal requirements associated with running a successful financial lending proposition. One can always conduct a background check or depend on word of mouth standing to establish credence.
7. Payday loans service credit score
Now this is a myth that has been circulated far and wide by the loan credit industries themselves. It states that short term crediting is necessary to form up a part of the credit rating scores that are valued so much by the western financial institutions in order to decide a person’s credibility to qualify for any monetary lending. Be it housing, education or car loans, credit rating has found a foothold in every part of the industry and loan agencies are making hay while the sun shines on the significance of the credit rating. But payday loans exist only in a handful of countries and in Australia, it is only a recent phenomenon. Even in the US, only thirty-six states allow such lending and most of the countries in Europe do not entertain the notion of payday loans as well. Payday loans are good for those who need immediate cash, but the idea that these are essential to boost your credit score is heresy at best.
8. Payday loans prevent illegal lending
This is a big misconception. Since payday loans are supposed to cater the truly desperate portion of the borrowing demographic, it is a false yet popular notion that such loans prevent the rise of loan sharks. People need to get their hands on money when in dire need and payday loans do fulfill that requirement but to say that such people would resort to loan sharks and lead to illegal unregulated lending definitely blows things out of proportion. After all, if that were the case, there would have been a surge in the number of loan sharks in countries which do not recognize payday loans, years Such things are not to be believed and it is best if one focuses on financial transactions without being affected by such rumor mongering.
9. Payday lending leads to assuredly large profits for lenders
There is a general reputation in the lending business that the lender always wins. But this is not always the case. As with any other venture, this business is also prone to the uncertainty that comes bundled with a financial operation. Low amount lending is very expensive to operate and is the main reason why many banks hesitate to support or have completely removed the practice of such lending. In addition, the cost of establishment and support infrastructure far outweighs the benefits reaped from any one loan transaction.
1o. Payday loans will ruin your life
Cash loan lending is most often associated with a cycle of debt. People see it as a kind of vicious circle that uses cash advances from lenders to pay off other pre-existing debts. Many times it is considered to be a life saver as people often borrow in times of hardship. But sometimes, it is only utilized to pay the regular food and maintenance bills which must be avoided at all costs. These loans are not stable sources of income and therefore, must be utilized as a financial stop gap filler until the forthcoming salary day which they are.
In this way, having knowledge about payday loans and making informed choices based on such decisions is all you need to be doing in order to have a pleasant experience with financial payday lending. So do the homework and then visit the nearest payday lender for more information and help.