Direct payday loans have earned a legendary status in the financial world, but can you always trust what you’ve heard about them? It’s easy to fall for a lending fallacy that, although fake, has just a little truth sprinkled in to make it seem real enough.
This list pokes at the biggest myths until they pop, leaving you with facts that help you manage your finances better.
1. They’re the Only Option if You Have Bad Credit
A low credit score can lock you out of mainstream borrowing options because many of the biggest banks think you’re too much of a risk.
Direct payday lenders, on the other hand, are marketed explicitly for people with bad credit, so you might believe these cash advances are your only option. But that’s simply not true.
There are online loans in Texas, like installment loans for bad credit. The qualification process for installment loans in Texas may be similar to the typical payday loan, and they might offer similar sized loans.
Where they differ is how you repay them. A cash advance is due in one lump sum by your next payday, whereas you repay the typical installment loan in Texas over weeks or even months of regular repayments.
2. Direct Payday Loan Lenders Only Operate In-Person
When most people think of cash advances, they picture a storefront promising quick funds and check cashing. In a way, they’re right. Historically, these brick-and-mortar locations were the only way to apply, but things have changed drastically in the past 20 years or so.
Nowadays, you can find a cash advance online as easily as you can order takeout. Online direct lenders make it possible to apply, receive funds, and pay it all back safely over the web.
3. You Only Have Two Weeks to Repay It
If you visit the Consumer Financial Protection Bureau to view their stats on payday loans, they reference this financial product’s two-week turnaround. While the majority of these advances are due back (in one lump sum) by two weeks, it’s a mistake to think every single loan is due back within that time.
Many online direct lenders set their due dates according to your next date of pay. Although two weeks is a popular pay schedule, your unique employment situation may result in a different term.
4. They’re All Are Scams
Payday loans have a lousy reputation thanks to a bad bunch of lenders that don’t practice responsible lending. They may not even check your credit when you apply, guaranteeing approval to anyone who fills out an application.
This is a warning sign, and rightly so. Online direct lenders who don’t care if you can realistically repay what you borrow hope you’ll miss a payment. That way, they can hit you with added interest, late fees, and other charges to increase what you owe them.
That said, payday loans play an important role in some folks’ lives. Direct lender payday loans might be the only way they can cover an unexpected emergency expense.
Responsible online direct lenders take the part they play seriously, and they’ll do their best to ensure their borrowers can handle their funds, high rates and short terms included.
Those high rates and short turnaround aren’t for everyone, but now you’ve debunked these four myths, it’s easier to see how they could fit into someone’s financial profile. Keep this in mind if you ever need help when you have bad credit.