Are you facing financial troubles and require funds immediately? Getting a loan is probably one of the solutions popping into your head. Well, you aren’t alone in this. Many people apply for loans any time they need financial assistance.
You can seek various loans, each with its terms and conditions. One such loan is a payday loan. As the name suggests, it’s a loan tied to your paycheck.
By definition, a payday loan is a short-term one with high-interest rates, which you take with the promise of payment upon getting your paycheck. Due to its terms and conditions, myths and misconceptions surround it, which are far from the truth, but make people shy away from acquiring payday loans.
We’re giving you the truth behind four of the common misconceptions around payday loans. Read on:
You Require Good Credit
Most lenders rely on the credit report and score to determine your eligibility to get a loan. If you have bad credit, you’re less likely to access loans. Based on this, the public believes the same concept applies to payday loans. However, it’s quite far from the truth.
Although some payday loan lenders check on credit, it’s not the main source of information on whether or not you qualify for a loan. Most require you to declare your income as you apply for the loan. Others use your current financial status. With this approach, you need not worry about getting a payday loan even if you have bad credit.
However, if you have very poor credit, consider getting alternatives to payday loans, like credit cards and short-term bank loans. The reason being you might get approval but receive quite low funds compared to what you requested.
You Cannot Request For An Extension
Sometimes, you fail to make loan payments within the agreed timeframe for various reasons. Lenders like banks allow for an extension of the loan payments, but many think that the same doesn’t apply to payday loans. However, it’s not true; you can extend the repayment period.
This misconception arises from the terms and conditions of payday loans. One such condition is giving the lender a post-dated cheque to pay themselves once it matures. However, you can request an extension, be it days, weeks, or months.
As you request an extension, it’s important to acknowledge there’ll be repercussions. These differ from lender to lender but encompass extra fees and higher interest rates.
It’s advisable to take a loan you’re sure you’ll pay off within a short period as per agreement.
There Are Hidden Fees
The misconception of hidden fees arises from the high-interest rates charged with payday loans. Some borrowers associate the rates with hidden fees, which isn’t the case.
Although wrong, there’s a possibility of hidden fees with illegitimate payday loan lenders. These want to take advantage of you as much as possible. Therefore, ensure you get the loan from a legitimate lender; a license can prove credibility.
The other source of the misconception is that lenders will have different overall fees for similar payday loan amounts. In this case, it’s best to compare several lenders. Also, inquire if there are hidden costs; a breakdown of the costs will come in handy.
Also, you might incur charges that you never knew about. You’ll notice this after getting into an agreement with the lender. This scenario arises when you don’t read the fine print on the loan agreement. Most, if not all, payday loan lenders will list all the costs associated with getting the loan. It’s information you want to know beforehand.
It Is Challenging To Get A Lender
Because payday loans are not often discussed publicly, there’s an assumption that only a few payday loan lenders exist. The result is borrowers giving up on acquiring payday loans even in financial emergencies.
Getting a payday loan lender is quite easy. A quick online search will show various websites through which you can access the loan.
As previously stated, there are illegitimate payday loan lenders. Be wary of them as you choose your ideal lender. Reviews from the lender’s previous and current clients can help you vet their credibility. Any negative review is something you shouldn’t ignore.
Alternatively, consider using a broker to get you the ideal lender. As you do this, remember you’re in a financial fix. Therefore, the affordability of their services is key.
Payday loans are quite beneficial when there’s a financial need. Misconceptions about this loan shouldn’t prevent you from getting one. The discussion above highlights these misconceptions. When you apply for a payday loan, ask the lender as many questions as possible to clarify everything before you sign the loan agreement.