There is a lot of talk about payday loans with some of the conversations being negative. However, much of this talk is simply from a place of misunderstanding. There are a number of myths that deter people from relying on this fast and easy funding source in their time of need. When it comes to your own experience with a payday loan, make sure you understand fact from fiction.
1. Puts You In Debt
When you compare a payday loan to credit card expenses, the idea that a loan will put you in debt is simply inaccurate. Payday loans are designed to be short-term loans. Instead of paying off the loan over an extended period of time, you pay off the loan quickly which can save you interest.
For example, say you charge a vehicle repair for $1,500. If you only pay the $25 minimum payment each month, it will take you around five years to pay off the charge. In terms of interest, that's five years of fees. With a payday loan, it's a one-time interest fee.
2. Lack Of Regulation
There is also the idea that the payday loan industry is unregulated, therefore they can charge whatever types of fees they want. This statement is simply untrue. Just like any other financial institution, payday loan lenders have to meet strict guidelines handed down from the government.
These polices include maximum loan amounts and interest rate caps. They also require lenders to follow a formula that ensures an applicant can only borrow an amount that they can actually afford to pay back within the loan period.
3. Limited Use
When you walk into a bank for a loan, they often want to know exactly what you are using the loan for. In some instances, they will even require some type of confirmation, such as a vehicle bill of sale. You have limited flexibility when it comes to how you will spend the loan.
Some people are under the impression that payday loans are the same and that they can only be used for emergency expenses. However, you can use a payday loan for whatever reason you want without any question from the lender. Whether you want to go on a vacation or a shopping spree the choice is yours.
In your time of need, a payday loan can be the difference between a catastrophe and survival. Make sure you aren't overlooking this emergency funding option.
To learn more, contact a payday loan company like Payday Express.
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