Payday Loan Myths – Applying for a Payday Loan

Many people have relied on loans to fund their startups, inject more capital into their business, join a college or meet an emergency. As long as the banking industry has existed, people have always taken loans.

A few people discourage others from taking loans, but the main reason is that they failed to pay in time and suffered the consequences. If the borrower manages his or her loan well, they will pay within time and qualify for more.

What is a payday loan?

Loans take different processing time and application processes. Today’s business world is swift and people desire fast loan processing time before a business opportunity lapses, a college opening closes or an emergency case turns into the worst.

The quick payday loans answer all these special requirements because they are processed within a very short time of between a few minutes to just a few hours. Their application is simple and borrowers only need to fill a simple online form or visit the lender’s physical location.

The borrower doesn’t need to be burdened by the loan for 2-5 years because Payday loans are paid within 30 days. As a result, the loans are usually in small amounts and the lenders increase the amount a borrower can qualify for as they faithfully pay their previous loan.

Myths that surround payday loans

For long, several myths have been built around payday loans. The originators of the myths were mostly people who didn’t want the booming business to succeed, especially players from the traditional financial institutions.

To date, more myths continue to build around the loans with another root from people who fail to manage their payday loan well or from those without clear information about the product. Some of the myths around payday loans are as follows.

Payday loan borrowers take the loans for emergencies only

Several surveys and studies have been done to scientifically get evidence on the truth about payday loans myths. One of the myths revolves around the belief that payday loans are exclusively for emergency needs like paying for a medical bill, repairing a stalled car, or to pay over delayed house rent.

Research has proved this myth wrong. According to research, about 16 percent of Payday loan borrowers use the money to pay for emergencies. Still, a whopping 80 percent use payday loans for recurring expenditure like mortgage, rent, utility bills and groceries.

Payday loans rip off their client’s money

Payday loans help anytime you need money within the shortest time possible. Because the lenders are not like the traditional financial institutions, they require you to pay at least within 30 days so that others can have money to borrow. If you pay within the agreed time, you will pay a small interest. The challenge arises if you fail to pay within the agreed time because your loan will attract interest and penalties, meaning you will pay more.

You can do better without a payday loan

Many people have been made to believe that they would be better off without a payday loan. Reports show a rising trend for payday loans globally which clearly indicates that people around the world find the loan useful.

Before the market grew, some lenders would take advantage of borrowers but they are no longer there today. Any lender is free to shop around for a lender with a better interest rate.

Payday loans have hidden charges

This myth comes from people who think the payday lenders fix their interest rate after the borrower receives their money but this is also false. The UK financial regulators are very strict on discloser of terms and conditions of loans. The lender must disclose to the borrower the rate of interest in the loan forms.

That is why most people who intend to take the payday loan first compare different interest rates from different borrowers. They obtain the information from the lender’s websites or by inquiring about the lender’s office.

You need a good credit score rating to get a payday loan

If you are used to taking loans from traditional financial institutions, you will tend to believe this myth. Payday day lenders make the process very simple for you. Most of them will not search for your credit score.

Their main interest is for you to get the money you really need and not face the burden of your credit history requirement. Payday lenders rely on the information you provide and they ensure you have a stable source of income.

If you convince them that you will be able to pay through the source of income you have, lenders will process your loan within a short time. This is one big advantage with payday loans that no other type of lending can match.