Consumers love payday loans online websites as they offer a world of convenience. There is no need for a range of paperwork that has to be submitted to the department and consumers can easily apply for the loan online and get their loans sanctioned as quickly as possible. In recent times, however, scam companies have come up that try to rob consumers of their personal details. This has led to consumers viewing even authentic and reliable payday loans online companies as frauds. To help consumers out, we’ve listed a few common myths that are floating around on the internet and we’ve provided a detailed explanation of why it is not true.
Myth # 1 – Banks now offer loans that are better than payday loans online companies
Not true. Most banks will not lend to customers who have poor credit histories. Even if you do have a good credit history, most banks will not offer short term loans as it is not profitable for them and a short terms repayment is fraught with more risk. A few banks in the US have now come up with different forms of payday loans that are called as CHECKING LOANS. These loans work in the same way but they are quite curiously marketed. For example, the bank will ask you to open a checking account. The customer can draw an amount from the bank even if there is no credit in it. This amount will accrue interest just like a pay day loan and the customer has the choice of repaying the loan every year or in a lump sum by putting in a deposit. A word of caution though, even though the lending process is almost the same, the actual interest rate is very high at about 365% for about 10 days. Furthermore, research has showed that customers who have opted for these loans are stuck in a debt repayment procedure for almost 175 days as compared to the 15 days or 30 days or a pay day loan. Most consumers have also noted that the bank will charge an overdraft fee along with the interest on the loan when the customer draws money from the account. At the end of the repayment period, the bank automatically withdraws the money from the account. If there is no money in the account, the bank withdraws the money anyway by paying itself resulting in more fees and loans for an unaware consumer! Please note that these loans are in no way better than payday loans and are actually worse locking the customer into an endless cycle of loan and payments.
Myth #2 – Payday loans have hidden fees
This is false. All authentic payday loans companies are strictly governed by local rules and regulations. As a result, they have to be completely upfront about their taxes and the fees that they are charging their customer. For example, lenders have to state their interest rates on the websites, in adverts and in every contract that the customer signs. According to the Truth in Lending Act, consumers have to be informed about any such interest rates, application fees and other fees that the consumer may have to pay before they accept the loan. The consumer is also allowed legal rights to complain about the lending firm in case these rules have not been followed.
Myth #3 – It is unethical as payday lenders charge a higher interest rate
For most payday loan customers, the interest rate is secondary. They usually cannot get a loan from any other source and they are well aware that payday lenders are their only choice. But we live in a free market and all payday lenders let customers know about the loan amount, the interest rate that is applicable on them and the way of paying back the loan. As a result, most customers are well aware of what they are taking on and the popularity of the lending service means that there is a demand for payday lending.
All authentic payday lenders such as runpaydayloans.co.uk follow legal rules of lending and collecting their payments from customers but there are scam companies and loan sharks in the market too. Please be advised that you are well within your rights to ask questions of any pay day loan company you have selected. If you feel that the company does not have a satisfactory reply for your question, please choose a different company immediately.