Payday loan delusions

Payday Loan Delusions: Confronting Myths You May Have Heard

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Borrowers sometimes entertain mistaken notions that lead to debt trouble and a negative experience with borrowing. So much of this trouble can be avoided by simply addressing some commonly held false assumptions. Here are a few of the most dangerous lending delusions:

  • Payday loans are free money. These are actually very high interest advances. These kinds of services are fast and convenient, but borrowers pay quite a price for that convenience. With APRs as high as 600% (varies accordingly), these services are by no means free money.
  • I can't take care of my balance right now, but I will be able to by the next due date. Some providers give borrowers the option of extending their repayment time for an additional fee. Borrowers often mistakenly believe that this will make taking care of the balance easier, when, in reality, it does just the opposite. Your financial situation is unlikely to improve by the next due date, and now you will owe even more because of the additional fees and interest charges for rolling the amount over.
  • Anyone with a job can qualify for an advance. These services tend to have more qualification requirements than just employment. The qualification criteria will depend on your lender, but most companies at least require that you earn a certain amount of money each month, have a steady source of income, maintain a bank account, and have direct deposit enabled (varies accordingly). These services are easier to qualify for than other types of services, but that is not a guarantee that you will be approved.
  • I can have my money the same day I apply. If you see companies claiming to deliver funds the same day you submit your application, you should be skeptical. Like any loan, these services require processing that takes time. The earliest any lender could have your money to you would probably be the next business day after receiving your application (varies accordingly).
  • If I don't repay a balance, nothing will happen to my financial record. Reporting and collections techniques are different for every company, but this statement is still probably untrue in most cases. If you fail to take care of what you owe, your provider has the right to recruit a collections agency, and this might appear on your financial record as a delinquency. If you have questions about what happens if you fail to pay as agreed, ask your lender before you apply.
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Life happens and a payday loan may help Payday loans are easier to qualify for than other types of loans but that is not a guarantee that you will be approved