Payday Loan Myths and Misconceptions

Kimberly Watson, Editor in Chief
January 26, 2012 /

Various perceptions exist relating to organizations that provide clients with a payday loan facility. Some of these misconceptions seem to have been inspired by movies and dramatization. However, to give any potential borrowers peace of mind, providers of immediate payday loan services, conform to the “Truth in Lending Act”, mandated by the FDIC. It determines that the policies of lending applied are transparent, and comprehensible, as are the conditions relating to consumers.

A particular myth of a payday loan is that it creates further debt. This is unfounded as loans of this nature are generally to settle outstanding accounts, or for emergency purposes. However, in any situation, there will be instances where the payday loan will not be used as intended, or the repayment period over-extended. This would naturally cause additional costs for the borrower.

A further misconceived idea, relates to a financial crisis, which is not something unique to people, of a certain income level. There are many seemingly wealthy families, who for various reasons require an instant payday loan. As all transactions of this nature are treated in the utmost confidence, this is a fact not generally recognized.

The purpose of a payday loan is to provide immediate relief and help to any one, regardless of how much or how little money they earn. This leads to another misconception regarding inflated fees for a payday loan. The facts surrounding this matter are that the only fees, for which a borrower is responsible, are usually based on the interest factor.

This means that the interest payable in respect of a payday loan can be at a significantly low rate, providing repayment conditions are fully met. However, as with traditional loans, should the repayment period be over extended, then added interest will be applied, in accordance with normal business practice.

 

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