Payday Loan Delusions

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

• Payday loans are free money. Quick online payday loans are actually very high interest loans. These kinds of loans are fast and convenient, but borrowers pay quite a price for that convenience. With APRs as high as 600% (varies by lender), payday loans are by no means free money.
• I can't repay my loan right now, but I will be able to by the next due date. Some lenders of quick online payday loans give borrowers the option of extending their repayment time for an additional fee. Borrowers often mistakenly believe that this will make repaying the loan 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 loan over.
• Anyone with a job can qualify for a payday loan. Quick online payday loans tend to have more qualification requirements than just employment. The qualification criteria will depend on your lender, but most lenders 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 by lender). Payday loans are easier to qualify for than other types of loans, but that is not a guarantee that you will be approved.
• I can have my loan the same day I apply. If you see lenders claiming to deliver loans the same day you submit your application, you should be skeptical. Like any loan, payday loans require processing that takes time. The earliest any lender could have your loan to you would probably be the next business day after receiving your application (varies by lender).
• If I don't repay a payday loan, nothing will happen to my financial record. Reporting and collections techniques are different for every lender, but this statement is still probably untrue in most cases. If you fail to repay quick online payday loans, your lender 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.