We all know that payday loans are not the most popular financial product on the market, but that doesn’t mean people should automatically jump to conclusions when they see a “payday loan” sign.
A lot of times it can be hard for someone who is in need of some extra cash to get approved for an unsecured loan from a bank or credit union. This is especially tough if you have been turned down by your local branches multiple times.
But there are a few myths that people often believe about payday loans that aren’t actually true.
Here are the top five myths about payday loans that keep lenders and consumers alike from making informed decisions. If you’re looking for a short-term loan, try to avoid these common mistakes.
- There’s No Way To Get A Payday Loan Without An ID
There’s no doubt that having identification will speed up the approval process for a payday lender. However, there are still many places where you won’t be able to get one without showing some kind of form of photo ID.
Some states require proof of income like a W2 or tax return, while others may require government issued photo IDs such as a driver’s license, passport, or military ID card.
You’ll also want to make sure that you don’t carry around too much cash because cashiers are allowed to ask for picture ID even if you’ve already shown them your driver’s license.
In Texas, for example, if you’re going to a store and they ask for identification and then later find out you didn’t have any, they could charge you with criminal trespass.
That said, there are still plenty of places where you won’t be asked for identification before getting approved for a payday loan. In fact, some places do not allow anyone under 18 to show their driver’s licenses at all.
It’s important to understand what kind of restrictions apply in your state so you can be prepared for unexpected situations.
- Every Payday Lender Is The Same
Most payday loan companies work pretty differently than each other. Some offer better rates than others, some charge higher interest rates, some require collateral, and others offer more flexible repayment terms.
Not all payday lenders are created equal. You may think you’re comparing apples to oranges when you look at payday loan websites, but chances are good that each company has different policies.
Even though some sites may say that they offer the same type of loan, they may charge substantially different amounts for the exact same amount borrowed.
If you’re unsure whether or not a company offers the best deal for you, always read through the fine print carefully.
- If I Don’t Pay Back My Loan On Time They Will Come And Take Everything
This is a big myth. While some companies may come after your paycheck and take everything you own if you miss a payment, this isn’t how it works for every single one.
The truth is that many payday lending companies have very lenient policies regarding late payments. Some allow you to pay only 50% of the missed payment until the next month and others might let you pay only 25%.
For example, if you owe $200 and you only pay back $100, the company may simply charge you $25 per month rather than $50 or $75.
If you’re worried that the company won’t accept your partial payments, just call the number on the website and explain your situation. They might bend the rules for you.
- You Can Never Qualify For A Personal Loan Unless Your Credit Score Is Perfect
There is no set standard for qualifying for a personal loan, and that means that there’s no perfect score that you can have to get approved.
The truth is that the average credit score for a person applying for a personal loan is between 700 and 750 points. It’s highly likely that you’ll qualify for a personal loan, regardless of the score you have.
However, it’s important to remember that your score is only part of the equation. Other factors like employment history, income, debt ratio, and credit utilization play into the decision of whether or not you get approved.
- All Payday Loans Are The SAME
When you are shopping for a payday loan, you’ll notice that there are several different types. Some loans are secured by real estate, some are auto loans, and some are unsecured.
Unsecured loans are typically easier to get than those two types. However, it’s important to note that the APR rate on an unsecured loan is generally higher than either of the other options.
Auto loans are usually have lower rates than secured loans since the money being lent comes directly out of the borrower’s car. But again, rates vary depending on the type of vehicle being financed and the specific conditions of the loan.
Secured loans are a bit harder to qualify for since the lender needs to get paid first. However, the interest rates are typically lower than unsecured loans, and in some cases, secured loans offer lower rates than auto loans.
No matter which option you choose, it’s important to research the terms and conditions carefully. Many people assume that because a certain company advertises a low APR, it must offer the lowest rates available.
But the truth is that some companies advertise lower rates and fees because they want to attract customers. They may not necessarily be offering the lowest rates possible.
Payday loans are not the ideal way to borrow money, but they are a viable option for many people. Just keep in mind that you must be extremely careful when choosing a lender or else you could end up paying far more than necessary.
The paydays are used for various money lending purposes and for that you must have a driver’s license, passport and many more such ids and documents for the sanction of a payday loan also your credit score needs to be perfect or else it will result in failure of your application. So be sure to keep all the documents before the application.