Payday loans have a bad name, not for the way in which they are taken but for the manner in which they are to be repaid. As a result, people tend to avoid them even when in dire need of immediate cash. It is important to clear the air about some of these misconceptions and provide the right picture so as to motivate people to approach registered moneylenders for these quick and easy loans. We make an attempt here.
What are Payday Loans?
Simply put, payday loans are by far the most easily available short term loans you can lay hands on. They are especially handy during emergencies like sudden illnesses or any other kind of family crisis. All you need are age proof documents stating you are an adult and a proof of identity. You also need to find a trustworthy and registered moneylender who can be approached for a payday loan.
There are fewer rejections and borrowers do not need to go through lengthy proceedings for availing the loan. Cash disbursal is quick too.
Payday Loan Myths Busted
There are common myths concerning payday loans. Here are some common ones;
The Annual Rates of Interest is Very High
Paydays are not meant for annual repayment. Their standard payback term is for two weeks. Extrapolating the rate of payback to a year is only colluding facts! The annual interest rates will only be applicable when the loan is rolled 26 times over for a yearly payback! And this is an unlikely situation in most cases. When you pay back the loan on time, the charges are perfectly affordable.
You will need Excellent Credit Ratings
The truth, however, is that there are moneylenders who do not check your credit ratings before offering a short term loan to you. These loans are both for good and bad credit scores. In fact, one of the primary reasons paydays are so popular is because credit ratings are not taken into consideration.
Opting for a Payday Loan will lead to Bankruptcy
Paydays have nothing to do with bankruptcy. You become bankrupt only when you are unable to manage your finances in a proper manner. Most people believe that since these short term loans have monthly payback cycles, not being able to pay up each month will lead to mounting of debts. However, it all depends on planning a schedule for paybacks. You need to have a disciplined payback schedule and stick to it in order to avoid getting into a debt trap.
Getting a Payday Loan will Adversely Impact Credit Score
Most lenders do not report to any credit agency. So this might be working in your favor. However, if you do not payback on time, then your case will be reported to a collecting agency and hence your credit score will be affected. At the end of the day, it is all about how responsible you are as a borrower.
Payday loans can prove to be a great help during times of need. A responsible approach is all that is needed for keeping all worries at bay.