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There are many falsehoods and misconceptions that exist regarding payday loans and similar installment loans. Many people assume that installment loans are not an option for them because of some negative comment they might have heard from a co-worker or friend. Below is a short breakdown of the top myths about payday loans.
- Installment Loans Are Only For the Poor
People assume that only those who are very poor or struggling financially would go for installment loans online. The truth is that Personal Money Network installment loans online are available to anyone. They are useful for people who have average income and modest savings.
In fact, most payday loans are not available if an individual does not have a job or a bank account in good standing. Many people who are very poor do not have bank accounts, or they might not have a job. It means that such loans are not only targeting those who are struggling financially.
- These Loans Come With Exorbitant Interest Rates
Payday loans do come with interest expenses – it is a part of doing business. Payday lenders must cover their costs, along with the risks of lending money to someone who does not go through a credit check.
While the raw numbers for interest rates may seem eye catching, the dollar sums are far more modest. For instance, an individual who is borrowing $400 for two weeks may only have to pay back $410, which means their interest is only $10. It comes out to a very reasonable sum considering the individual is being leant money quickly and with very few questions asked.
- There are Hidden Fees in Installment Loans
This is one of the most significant misconceptions regarding installment loans. People assume that if they are told they will have to pay back $410 on a $400 loan, some nasty surprises are awaiting them in two weeks.
It is not true. Payday lenders are known for being very upfront about the terms of their loans. When you are seeking an installment loan, you are sent a contract that clearly outlines every aspect of the deal.
The contract mentions the amount of money being provided, the interest, how it breaks down to dollar amounts, and when the loan is due. There is also a detailed description of what the lender may do if you are late on your payment. These loans have NO hidden fees.
- You Need Good Credit for an Installment Loans
The hallmark of payday loans or installment loans is that you do not have to go through the process of doing a credit check. These loans are designed to assist those who may have little to no credit, which is why the only requirements are a job and an active bank account.
If you have very poor credit, you are still eligible to apply for and receive money through payday loans. Most agencies start you out with a modest sum, such as $200 or $300. If you successfully borrow and pay back the first loan, you may receive a more significant sum in the future.
- Payday Loans End Up Costing More
Another incorrect assumption made by people is that taking on an installment loan and paying interest ends up costing the person in question more company. In contrast, they could handle their overdraft fees and late bill fees without needing to take on a payday loan.
It is another false claim, as most payday loan interest rate fees do not come out to more than $10 to $20. A single overdraft fee is $30 to $55 at most banks, while individual companies have different fees for late bill payments.
Someone who requires a quick injection of cash a week before their upcoming payday is much better off if they take an installment loan. Yes, they would have to pay the interest on the loan when it is paid back in a week or two. But that interest is far less compared to a single overdraft fee, not to mention overdraft fees and late bill fees.
Payday Loans Are Worthwhile When Used Appropriately
An installment loan is significantly beneficial for individuals who use it properly. The idea behind these short term loans is to help people who require a modest sum of cash to pay urgent expenses. These should not be used as long term loans, or as substitutes for working and earning a paycheck.
So long as people use installment loans in the way they are intended, they should have no issues paying them back and benefiting from the short term assistance.
This is a collaborative post.