It’s very difficult to get a loan from banks. If you have bad credit history or no credit history, it gets downright impossible to get any type of loan or credit facility at all. That means if you do not have a good credit rating, you will not get a loan, a credit card or even a rental apartment.
For these customers, the only credit option available is a payday loan. These companies provide simple and easy cash advances. The loans are short-term and repaid as soon as the next salary is received. Almost 90% of all loan applications are approved and loans are sanctioned in about 20 minutes or less. This simple application process and quick cash disbursal is the main reason why payday websites have exploded in popularity. Times have changed though. In recent years, the media has come up with horror stories about how payday companies fleece their customers. Is this really true? If payday companies are so bad, why do so many customers use them? Lets just take a look at the common myths that are prevailing about payday loan companies.
Myth #1 — Payday websites charge exorbitant interest rates
Think about it; we know that banks have federally regulated low interest rates on loans. That means they charge a low interest rate but increase the period of the loan so that they can make a profit. Banks do not give short-term loans as they cannot make a profit due to this low interest rate. Payday loans on the other hand only provide short-range loans. As a result, they are allowed to charge a higher interest rate. On an average, customers have to pay $25 for every $100 they borrow which is quite affordable if you are taking the loan just for one month.
Myth #2- Online payday loans websites cheat customers about their interest rates
Legally, payday websites are required to show or list their APR or interest rate on the home page and every page of their website. The home page will also have a calculator which will help the customer understand how much they have to pay on the amount they are borrowing with the current interest rate. The loan officer will also confirm the APR rate verbally and list it prominently on the loan contract along with the repayment date to prevent problems. Customers can also question the loan and interest rate before taking the loan from the company. However, you should know that APR rates tend to vary across the board and you should compare rates before finalizing a lender.
Myth #3 — Online payday loans hide processing fees
This is not true. All payday companies have to show the fees that they will charge before the customer takes the loan. This is a legal requirement enforced by the Truth in Lending Act. The Act states that loan companies have to provide, up front, full disclosure of the loan amount, its terms and interest rates to protect customer rights. Customers can use legal means to enforce their rights in case these rules were not followed.
Myth #4 — Online payday loans websites are not regulated
The internet is a vast entity and it is filled with good websites as well as dangerous places as well. If you want to take a payday loan, we advise you to investigate the lending company properly. For example, UK-based customers have to check whether the loan company is UK-based. The company should also have a Consumer Finance Association licenses and logo on the home page. We urge you to read the fine print and the TERMS OF SERVICE page to protect yourself.
The reality is that more than 10 million customers have bad credit. These customers are regularly refused bank loans that they need desperately. With no other option, these customers would be desperate and on the verge of bankruptcy. Online payday loans provide a valuable service for these customers and it also helps them stay afloat during difficult times.