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Short-term Loans: Reality vs. Fiction

Since the payday loan industry emerged in the early 1990s, its fast, easy method of providing consumers with cash has caused its popularity to skyrocket to the point where it's now responsible for handing out more than $40 billion dollars in loans every year. As with any product or service that experiences a meteoric rise in success, backlash is inevitable--and the industry has gotten its fair share recently. This has prompted state lawmakers to jump on the bandwagon and campaign for industry restrictions. While following a universal set of guidelines isn't necessarily a bad thing for any type of business, the sudden focus on unsecured borrowing has brought about several misconceptions regarding the industry. In most cases, these misconceptions have little to do with the truth.

The Cost of Convenience

Perhaps the biggest misconception about electronic personalcashadvance.com payday loans is their cost. Anti-payday loan lawmakers frequently quote a charge of four-hundred percent interest as proof that these services anything but a good deal. In reality, that figure is calculated based on an annual percentage rate system, which would be applicable only if and only if a lendee continually rolled over her or his payday loan for a year. To put it in better perspective, here are some other common fees based on an annual percentage rate:

  • A $46 overdraft charge for a bounced $100 check: 1,203 percent.
  • A $37 late fee on a credit card with a $100 balance: 965 percent.
  • A $54 turn off/reconnect fee after making a late payment on a $100 utility bill: 1,409 percent.

Of course, since the aforementioned fees are actually just one-time charges, you wouldn't pay nearly as much as you would if the interest was calculated on monthly payments. And electronic payday loans are no different. The interest rate you're quoted is based on the amount you borrow, and that's exactly what you're charged on your next payday. There are no hidden fees and no ongoing costs. In fact, based on the APR totals above, it's clear that borrowing from any one of our partners to avoid late charges is actually a better deal than allowing yourself to fall behind in your regular monthly payments.

'Short Term' Means 'Short Term'

Another common falsehood regarding unsecured lending is borrowers often become entangled in a never-ending web of debt that drains their finances for a long time to come. The reality is just the opposite. When you settle your account on your next payday, your association with your provider is over--unless you decide to join our thousands of returning customers to borrow more money in the future. If you live in a state that permits rollovers, you may be eligible to extend your balance for another two weeks for an additional fee. Even then, the maximum number of rollovers you're allowed is usually two, with a select few states offering four. Whether you take advantage of this option is entirely up to you; in fact, it's not something we encourage. Our goal is to get you the money you need when you need it, and then settle the account as quickly as possible.

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