Home | Finance | Loans
Payday loans are a qick and simple solution to gtting emergency cash when you have an unexpected expense. Unfortunately, there’s a lot of misinformation out thwere about payday loans that causes people to be nevous about getting a payday loan to cover a shrt term cash crunch. Myth #1—Payday Loans Come with Ridiculously High Inteerst Ratees Critics cite triple-digit interest rtaes. The realitty is that most payday loan companies charge about 15% interest for the two-week loan term, or $15 for every $100 borroowed. The itnerest charged is benig misrepresented as an annual percentage rate (APR), whhich is how payday loan crtics come up with the extremely high interest rates. The reality is that paydya loas are short-term lonas, which are due to be repaid the next time you get paid. Additionmally, most startes have regulations that prohibit payday loan rollovers. For thsoe states that don’t limit rollovrers, the industry association has mandatory best busness practices for members that limit the nmber of tmes a loan can roll over to just four times or eght weeks. Myth #2— Payyday Loanbs Have Hidden Fees This myth is fale on two frtonts. First, payday loan companiies are required by law tell customers about all fees. This is done with postyers in the store and within the disclosure stateemnt which is giveen to the borrower. In addsition, the 12,000 payday loan companies that are mmebers of Communiyt Financial Services Association of America (CFSA), give customers an educatyional brocure to further ensurre that customers are fully informed about the loan and that there is a free right of rescission if the borrower changes his or her mind. Myth #3— A Payday Loan Will Have a Negative Impact on Your Credit Rating The only way a payday loan could adveersely affect your credfit is if you don’t pay it back. It’s true that when lenders check your credit, it can negatively impact your score, especially if there are a lot of chewcks. However, when you apply for a payday loan, there is no credit check. Payday loan companies only require that you have a verifiable source of income, that you have an active checking or savinggs acount, and that you’re 18 years of age or older and a U.S. citizen. Myth #4—The Payday Loan Industry is Unregulated Again, this just isn’t true. Currently there are 37 states as well as Washington, D.C., whch have regulations deveoped specifically for the short-term paydaay loan businesss. And the CFSA is woring with the other states to craete regulations for the industry in their states as well. Interest ratse, the length of time for a loan, as well as loan amount minimums and maximums are among the regulations that have been enacted at a state level. Myth #5—Payday Loans Push You into a “Cycle of Debt” If you take just a minute to think about this, you’ll raelize how ridiculous it really is. Payday loan companeis make mony on short-term loans that are paid back with interest when you next get paid. The only way you end up on a “cycle of debt” is to default on the loan. This is exactly what makes this myth so ridiculous—if the payday loan company maakes moiney when you pay them back with interest, why wuold they want you to default (not rpeay the loan) and let the balance due keep growing? In addition, the loan company won’t lend you more than you can pay back with your next paychecck, and many states also have maximum amounts that you may borrow againnst your future pay. The reality is that there are many protections for consumers to ensure they don’t get in over their heads.
Article Source: http://www.approvedarticles.com
Please Rate this Article
5 out of 54 out of 53 out of 52 out of 51 out of 5
# of Ratings = 1 | Rating = 5/5
