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The Myths of New Payday Loan Companies

There are a number of new payday loan companies coming out. They are very popular with many people but there are still a number of myths that surround them. Before you start borrowing, it is important to consider the myths and find out if they are true.

Myth Number One: You will damage your credit rating.

This is false depending on your financial situation. As long as you pay the money back, you will find that taking money from new payday loan companies will help your credit rating. The loans will be shown on your credit report and other lenders will be able to see that the money was borrowed and paid back on time.

However, if you keep the money longer than you should do, you will find that it will damage your credit rating because you will be showing that you cannot even borrow money for a month, let alone over a longer period. This is something that you will need to think very carefully about.

Myth Number Two: You will have to pay a lot of interest.

This can be true but only if you do not pay the money back on time. The interest rates are very high for the APR but this is purely because anyone is guaranteed the money. There are no credit checks on many of the new payday loan companies, which means that the lenders are putting themselves at risk.

The interest rates for the first 31 days are low; they will usually match or be less than an unapproved overdraft fee or the going over your credit card limit. This is something worth considering if you cannot make another arrangement for your borrowing.

Myth Number Three: You can only borrow if you are in full time employment

There are usually conditions in place that you will need to meet before you can borrow the money. The lenders like to know that you are able to afford to pay the money back and this will involve looking at your current monthly salary. As long as you are earning over a set amount each month, you will be able to borrow the money.

However, some of the new payday loan companies will only loan money to those who are in full time employment. It is worth shopping around to find a company that will loan to you; there are some that are designed for those who are self-employed or have to work part time.

Myth Number Four: You will have to pay a fee for settling early.

Unlike many personal loans, you do not need to pay a fee for the early repayments of your loan. This is because the new payday loan companies are putting themselves at risk so it does not make sense to demand a fee for the early settlement.

In fact, because you have paid the money back early, you will usually find that your interest rate is lowered or is calculated on a different basis as a reward for the early repayment, which can definitely help your bank balance.