If you have ever come across any information regarding payday loans and questioned its authenticity, we have a couple of responses for you.
Here, we dispel four popular payday loan myths and misconceptions.
Myth 1: Payday Loans Target Low-Income Households
Contrary to what is widely assumed, payday loans are actually made available to everyone with no particular target audience. The loans are offered regardless of the individuals’ financial standings or areas of residence.
Lenders do not especially direct their services to financially unstable or struggling candidates. The only objective of payday loans is to offer short term financial assistance to people as a form of temporary relief.
The only reason that this myth was formed and spread was because credit scores would not be checked with these types of loans.
This was introduced to make the loans available to even those who struggled to maintain a good credit score so that it would be possible to offer payday loans for bad credit scoring individuals.
Myth 2: There Are Hidden Costs Involved
There are actually no hidden costs involved in lending payday loans. The reason why it was widely believed that there were undeclared costs involved was because of the lack of understanding regarding the terms and conditions of the contract.
Many people used to shy away from the technicalities of the contract and used to prefer not reading it, automatically assuming that there must be certain undisclosed charges involved.
What a lot of people fail to understand is that the industry of short term loans is strictly regulated and regularly monitored, because of which all charges, fees, and related costs must be clearly and briefly discussed.
Other points to be considered include how no new costs and charges can be added after the loan has been granted and released.
It is agreed that payday loans have a comparatively higher interest rate but it is so because of their unsecured nature, payday loans do not require any collateral assets.
Myth 3: Short Term Borrowing Affects Your Score Negatively
As long as your monthly payments are made regularly timely and you return all the loaned money in a short period, it will have a positive effect on your credit scoring.
Your credibility for taking out a loan is already evaluated by the creditors at the time of borrowing, they are able to ascertain your financial standing and repayment capability by your existing credit rating.
If your loans have been repaid on the agreed dates with the amounts finalized, you will only see an improvement in your credit scoring.
The only circumstances where you may witness a negative impact on your credit rating is when you are unable to repay a loan on the decided dates.
Myth 4: Payday Loans Are Quickly Granted Because Customer Service Is Poor
It is true that the loans are quickly approved and granted but this does not imply that the verification or assessment time lengths are shortened.
Lenders carry out comprehensive and rigorous application checks to verify candidates’ loan criteria, financial standing, and repayment possibilities.
The loan applications are thoroughly assessed, evaluated, and analyzed by checking the applicants’ loan histories and income statements.
Although the process of loan granting itself is quick, it is the application assessment that is time consuming.
As far as the customer service is concerned, all calls and customer service interactions are recorded and monitored.
In case of poor service, a formal complaint is lodged and the matter is looked into almost immediately.
This essentially shows that it is rare to come across unsatisfied customers with such a dedicated customer service team.
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