4 Interesting Facts You Should Know About Payday Loans
For years, payday loans have been a quick go-to outlet for those in need of some quick cash. It’s not surprising that such an interesting industry also has a few interesting facts you might want to know about. Some of these facts may even give you the upper hand the next time you’re in need of a payday loan.
Payday Loans Are Just like Other Types of Credit
You can thank the federal Truth in Lending Act for this one. In order to make payday loans more transparent to customers, federal officials mandate payday lenders to provide not just the annual percentage rate (APR) of the loan, but also the dollar amount of the finance charge prior to signing the loan.
These stipulations are the same ones required of credit card companies and traditional lenders. As a result, there’s less chance of you being hit with mysterious finance charges you didn’t see before signing on the dotted line.
Contrary to Popular Belief, the Typical Payday Loan Borrower Isn’t Low-Income
Mention the words “payday loan customer” and the first thing that comes to mind is someone with little luck and a low income. However, the reality surrounding the typical payday loan customer is a bit different from what you’d expect.
Believe it or not, some of the biggest users of payday loans are middle-class income earners. According to Snarketing 2.0’s Ron Shevlin, 38 percent of payday loan borrowers in 2012 earned over $70,000, while 32 percent earned less than $70,000 but over $30,000.
Military Consumers Have Unique Protections When Dealing with Payday Loans
The unique financial circumstances surrounding military service members and their dependents have spawned a number of unique protections. These protections enable military consumers to utilize payday loans without suffering from unforeseen pitfalls:
- The payday loan APR for military consumers is set at a maximum, with the majority of fees and charges included in the APR.
- Military consumers do not have to grant creditors access to their bank account as a condition of the payday loan.
- Military consumers are also given important disclosures about the costs of their loan as well as their rights as a consumer.
Payday Loan Lenders Eschew Credit Checks
Most traditional lenders rely on a collection of tools to determine a customer’s ability to repay the amount loaned. Credit checks are the most commonly used of these tools, as they usually provide a clear and quick way for lenders to vet their customers.
Unfortunately, a wide variety of socioeconomic circumstances have impacted those who’d otherwise have excellent credit scores, making it more difficult for them to borrow money. This has made payday loans a popular avenue of extra money, as these lenders do not perform the customary credit check on their customers.
Without a credit check, however, lenders must charge slightly higher fees and interest to their customers. Nevertheless, these loans have proven quite popular with those who don’t have other ways of borrowing cash.
For more information, contact a company like EZ Money.