Payday Loans - Myth Vs Reality

By Chadwick Davis

Everyone has heard the numerous rumors surrounding the popular payday loan industry and its supposed "negative tactics" and "unethical techniques". It's also not hard to find an internet blog or two about the "outrageous interest rates" or "horrible customer service" in relation to the payday loan process.

With so many negative and untrue allegations floating around, perhaps there is a need to dispel some of the rumors. Take a moment to read through the top five most circulated payday loan rumors below. You might be surprised to learn the truth about these heavily published myths.

TOP FIVE RUMORS ABOUT PAYDAY LOANS

5. Payday loans are full of expensive hidden fees.

All potential fees are clearly described in the agreement each customer must sign before attaining a loan with a reputable lender. As with any contract it is important to fully read all of the text prior to signing. Reputable payday loan companies prefer to keep different fees to a minimum in order to streamline processes and prevent confusion with customers. Typical "fees" associated with a payday loan usually include:

• Initial Loan Fee - A fee assessed at the time the loan funds are given. This is the company's fee for providing its services to the consumer.

• "Extension" Fee - A fee assessed when a customer isn't able to honor the original payoff date and requires an extension of time before the balance is due again. (Most states limit the amount of extensions a customer can request).

• NSF Fee - A fee assessed when an attempt to withdraw funds from a customer's account is denied due to non-sufficient funds.

4. Payday loans are too complicated.

Respected payday loan companies have a ready and willing Customer Service department available to answer any and all questions a customer might have regarding any aspect of the loan. In addition, creditable payday loan companies have enacted a straightforward and streamlined process for requesting and attaining a loan. All aspects of the process are presented up front and each customer is asked to read and agree to the terms of the loan prior to receiving the funds.

3. Payday loans should only be used as a last resort.

Contrary to what you may have been told in the past, payday loans are actually a cheaper means of immediate funds for people who may have otherwise had to find an alternate, less desirable, and more expensive option. For instance, a payday loan fee is often less expensive than a bank overdraft fee. They are also usually cheaper than a typical credit card "over-the-limit" fee and generally less expensive than the costs associated with restoring a service that would have otherwise been revoked - such as a utilities reconnection or late fee.

2. It is too easy to get behind or miss a payment.

Honorable payday loan companies are very clear about when a payment is due and what will occur if a payment is missed. In addition, they will do what they can (within the limits of the law) to work with customers who cannot honor prior payment obligations. Customers who anticipate an issue regarding paying back the loan on time should contact the company's Customer Service line to work out arrangements and explore options.

1. Payday Loan companies prey on people who can't repay their loans.

The vast majority of payday loan customers will pay back their loans on time and never require an extension. Respected companies recognize that an individual is far more likely to pay the debt back in full if the company is ready and willing to work with them. In other words, reputable payday companies would rather work with you to achieve payment in full than take a risk of not receiving any funds at all.

As you can see, the reality behind the payday loan industry is often in stark contrast to the rumors and internet reputations that precede it. For millions of Americans this industry provides a safe, secure, and welcomed alternative when they are faced with a financial crisis. Those same people would likely tell you that this service acted as a lifeline when they needed it most.

Finding a reputable payday loan organization which is dedicated to providing a good customer experience is a route that people should not be afraid of. Often times this service can be exactly what a consumer needs.

Customers should research any organization prior to doing business with them. It is also advisable to make sure that the payday loan company is reputable and that you are working directly with the actual organization and not doing business via a "Lead Site". Direct payday loan websites generally have a "member log-in" area on their website. A Lead Site often looks like a payday loan company, but instead is actually a site which collects the names of people who have inquired about an online loan. It then "sells" those names to individual payday loan companies for processing. Look for disclaimers which are often located on "Lead Sites" that state they offer referrals to payday loan organizations.

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