Exposing Myths About Payday Loans

Posted on Thursday, October 22nd, 2009 at 5:47 pm in General Payday Loan Tips

Payday loans are gaining in popularity as the economic crisis continues to cause hardship for families everywhere. Many people are unable to put any money into their savings, which leaves them without a reserve to draw on when a financial emergency crops up. A payday loan can be the ideal solution when you have to get your hands on a few hundred dollars in cash but you’re still waiting for your paycheck to arrive.

But with so many people looking at applying for a payday loan for the first time, it’s inevitable that there are some misconceptions about these short-term lending products. Here we try to clear up some of the most common myths about payday loans.

All payday lenders are disreputable and dishonest: There are certainly shady operators out there, but the majority of payday loan issuers play by all the rules and are in business for the long haul. The rapid growth in the industry has brought a lot of new lenders to the market in recent years, however, particularly on the internet. Given how quickly and easily one can set up a website and market a service, you do have to be careful when picking a web-based company to borrow from. Check them out online and through your Better Business Bureau and the Federal Trade Commission to see what people are saying about them before you apply.

I don’t have a house or car to offer as security for a payday loan: One great thing about a paycheck loan is that you don’t need any collateral. The lender probably won’t even check your credit either, since they’re really only interested in seeing that you can repay the loan with your income.

I won’t be able to get a payday loan because my credit is terrible: This is absolutely not true. Some loan providers will check your credit if you ask for more than $1,000, while many never check any applicants’ credit records at all. This is another advantage of payday loans – they’re designed to be accessible to as many people as possible, so the lender just needs to be convinced that you’ll be able to pay them back. Also, since the loan companies know that their interest rates are unusually high, they have to provide a service to people with no collateral and/or poor credit – demographics that most other lenders won’t do business with.

I don’t have a bank account, but that’s OK isn’t it?: No, sorry, but you do need a bank account to get my payday loan. If you’re getting your loan online, the money is deposited in your account and then debited again, along with the relevant fees, on the due date. That’s one of the reasons why you can get this type of loan with so few checks. Similarly, if you get a payday loan from a bricks-and-mortar lending outlet in your neighborhood, you’ll have to give them a personal check from your account as security.

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