The Truth about Short-term Lending
In your quest for a short-term loan, you've no doubt encountered sites that either make payday borrowing seem like the best thing that could ever happen to you or, at the other extreme, those that condemn cash advances as usurious and unfair. Obviously, in reality, the truth lies somewhere in the middle, but how are you as a borrower supposed to discern which claims are indeed true? Perhaps we can help. Below, you will find the five most common (and most egregious) myths about short-term lending products that we hear from our visitors. Armed with this list and the accompanying explanations, you will be far more likely to have the most positive experience possible.
- Short-term loans hurt more than they help. This statement is a sweeping generalization that simply does not ring true for most borrowers. The underlying truth behind this myth is that, of course, if you take out an advance on your paycheck too frequently or borrow knowing that you will be unable to repay in time, you set yourself up for financial disaster. However, responsible borrowing of funds can actually save you from financial ruin. For example, it could mean the difference between making your car payment on time and paying late only to have to pay penalty fees and higher interest rates down the road.
- Online payday funds are available instantly. Unfortunately, this is a bit of an overstatement. While it's true that the electronic application and qualification process is incredibly quick, there is just no such thing as an "instant" loan. Processing your paperwork and verifying your information takes time, even when everything is handled electronically. That is not to say, though, that you can't find a lender who offers instant approval decisions. These lenders can tell you right away whether you qualify and for what amount.
- The interest rates on advance payday products are unaffordable. The key to making your experience affordable is to use your advance as it was intended-an emergency solution to a short-term cash flow problem. Keeping the loans infrequent and short will ensure that the finance charges stay reasonable. Take this example-if your lender charges a finance fee of $17 per every $100 borrowed and you borrow $200, you will owe $234 on the due date. Considering the trouble you avoided by getting the funds in the first place, the finance charge seems more than reasonable.
- If you borrow online, you always have to fax in documents to the lender. While a few lenders do conduct parts of the approval process via fax, this is far from true of all providers. In fact, many of our lending affiliates specialize in paperless, or faxless, loans.
- When you need cash quickly, it's more efficient to borrow from a brick-and-mortar outlet or pawnbroker. Typically, when you deal with a physical loan provider rather than an online company, you must write the business a post-dated check in the amount of your principal balance plus interest. To do so, you will have to drive to the office, wait in line, fill out mounds of papers, and then wait to be approved. By contrast, you can request funds online at any time of day from any computer, and you don't have to hassle with checks, lines, or paperwork.