Payday loans have been facing severe criticism from both media and consumers since their entry into the market. You must have become accustomed to a lot of stories that are very commonly heard these days about payday lending. They are well known as the payday loan myths. This article sheds light on the most common payday loan myths as well as tries to explain the benefits that you can get out of them. With the rise in the number of people using payday lending to get by, the number of cases of pay day loan consolidation has also undergone a rise.
Cycle of debt – This phrase has become very well attached with payday loans. The fact of the matter is that there isn’t much truth in it. Most people are known to use payday loans under very rare circumstances. Payday loans are never to be confused with long term loans. It proves to be of great help during emergencies. Payday loans are given out on terms that make it important for you to pay off your loan on your next payday. This proves that there is no way you’ll ever be stuck in a cycle of debt if you pay off your loans on the paydays.
Loan sharks – There is no way you’ll ever be taken advantage of if you take out pay day loans from a reputable payday loan company. These are meant to be used for emergency purposes only. The emergencies may come up in any form such as health expenses. Pay day loans are necessary in such situations.
Bad employees – The companies offering payday loans don’t compete against each other on the loan prices. This leaves them with just one area to compete on i.e. the services. That’s how they are going to survive the competition. The best way to gain a competitive advantage is by making sure the employees are knowledgeable enough to carry out the given task with a complete sense of professionalism. This makes it very important for the loan companies to take care of their customers.
Poor and vulnerable people – The culture or employment status of clients are not taken into account while issuing payday advances. There are hardly people that won’t qualify for payday advances. If you’re a working adult and facing an emergency, the payday loans can rescue you faster than any bank or union loan.
Hidden costs and high interest rates – It is important for the payday cash loan facility to disclose information regarding interest rates, application fees and other charges. There are very high interest rates on payday loans because of the short durations for which the loans are provided. The level of risk is higher here than in any other type of loan.
Coercive collection methods – The payday loan companies are meant to make collections in a completely fair manner. No criminal actions should be involved in the collection methods. All that the lender can do is transfer the responsibility of making the collection to a collection agency.
OFT guidelines – The short term lenders are required to stick to the OFT guidelines. This is to ensure the practices and collections are done in a right way. The payday loan process must remain comprehensible to the consumers.
Unethical – There are forums that highlight the payday lenders as being immoral and unethical in their behaviours and practices. The objective of a pay day loan is to help customers during emergencies until the arrival of their pay day. There are payment plans for those who are facing difficulties paying off the loan on time. Importance is given to the affordability factor of consumers as they work on making payday loan payments.
The aforesaid points are payday loan myth busters. They will help you understand the concept of payday loans better and remove any doubt that you might have on your mind as you go looking for payday loans.