Payday Loan Facts vs. Fiction
Want the truth about payday loans and cash
advances? There are plenty of myths about payday advance services, so we have
put together a list of the more common misconceptions about this service. You
may also take a look at our
FAQ Page for more information on payday loans, cash
advances and fast cash loans.
FICTION: They charge outrageous rates.
FACT: Payday advance fees typically cost less than customers' alternatives.
- Bank/merchant fees on one bounced check can cost three times that of a $100 advance.
- Payday advance APRs are often lower than customers' alternatives (on the same 2-week term).
- $100 payday advance with $15 fee = 391% APR.
- $100 bounced check with $48 NSF/ merchant
- Fees = 1,251% APR
- $100 credit card balance with $26 late fee = 678% APR
- $100 utility bill with $50 late/reconnect fees = 1,304% APR.
FICTION: They put customers into a cycle of debt.
FACT: Most customers use payday advance responsibly and moderately.
- It's a closed- end, short- term transaction with a one- time flat fee. No revolving debt and no additional fees or accruing interest if not paid when due.
- 66% use payday advance to cover unexpected expenses or a temporary reduction in income.
- 34% use it for planned expenses or other discretionary uses.
- 60% either did not renew in the last year or renewed only 1-4 times.
- Research and regulators confirm more than 70% use the service about once a month or less.
- The Credit Research Center national survey reports 78% use 14 or fewer times annually.
- Wisconsin Dept. of Financial Institutions reports 71% use 15 or fewer times.
- North Carolina Commissioner of Banks reports 73% use once a month or less.
FICTION: They take advantage of unsuspecting customers.
FACT: Payday advance customers make informed decisions and receive consumer protections under law.
- Millions choose payday advance as a dignified, discreet solution for temporary cash flow problems without asking family for money or pawning personal items.
- 70% choose payday advance for reasons of convenience (quick, easy process & fast approval).
- 96% are aware of the finance charge & 78% recalled it being disclosed as an APR.
- 92% believe payday advance is a useful service, only 12% were dissatisfied with last advance.
- 33 states and D.C. provide balanced, responsible regulation of payday advance companies.
