Payday loans are fast, easy online loans. That is why they are a popular option. However, many people are reluctant to get a payday loan because there are a lot of myths about it. The following myths need to be debunked.
Myth: Payday Loans Have Extremely High Interest Rates
Fact: It is true that payday loans have higher interest rates than other loans. However, many people claim that lenders charge people 300 percent in interest, and that is not true. Many of the reported interest rates are based on yearly interest. Most payday loans are paid back within two weeks.
Myth: Most People Cannot Pay Their Loans Back on Time
Fact: Studies have shown that 90% of people are able to pay their loans back on time. Everyone who applies for a payday loan must have a reliable source of income. That is why it is rare for people to default on a payday loan.
Myth: Payday Loans Exploit Low-Income People
Fact: Many people believe that the payday loan industry is designed to take advantage of low-income people. However, the vast majority of people who apply for payday loans are middle-class people. They work hard, but they have fallen on hard times. The average person who applies for a payday loan makes between $25,000 and $50,000 per year.
Myth: Payday Lenders Charge Hidden Fees
Fact: Lenders can charge additional fees. However, they are required to disclose any fees that they charge you. It is illegal for lenders to charge you extra fees without telling you.
Myth: It is Cheaper to Overdraw Your Account
Fact: Many banks allow you to overdraw your account. However, this is a bad idea. It is actually more costly to overdraw your account. If you get multiple overdrafts, then you can easily spend hundreds of dollars in fees.
