A payday advance, or a payday loan, is offered to help you make ends meet until your next payday—when you must repay the advance money to us.
Some call it a money-draining trap as it can leave you stuck in a cycle of debt. Critics even say that companies with this offering prey on financially-insecure people with its high interest rates.
But, payday advances remain to be a go-to among low-income borrowers despite the criticisms.
A US-based financial website made a survey in October 2017 which involved 1,000 people who had a payday advance in the last year. The results shocked both us and the critics of the payday lending industry.
So, is it just a myth that payday loans are bad for you? Let’s look at a payday advance more and see what the borrowers, who know it best, have to say about it.
Most Payday Advance Borrowers Don’t Regret Getting One
Since some have annual interest rates that go up to 400%, we can’t blame you if you feel like you’ve been ripped off.
However, the survey shows it’s not always the case. Despite its well-known disadvantages, the majority of people say they were satisfied when they got a payday advance.
The survey states that 51% say they don’t regret having a payday advance. That’s compared to a smaller, yet still significant, 36.7% who said they regretted it.
Meanwhile, 12.3% were undecided whether a payday advance benefitted them or not.
When asked if payday advances improved or worsened their situation, 44.2% said they helped improve their lives. In contrast, 30.3% said their financial status worsened while 25.5% were neutral.
Borrowers Were Able to Put Their Payday Advance into Good Use
Payday advances are normally accessed by people without emergency savings. These are also sought by people who can’t get or are intimidated by regular bank loans.
Yet, those who qualify for bank loans still prefer a payday advance for its quick application. This is despite having a higher interest rate.
This convenience is a good selling point, even though people are aware of its higher costs.
The survey also looked at why people needed a payday loan. Covering essentials such as rent, utilities, and groceries was the top reason while 48.5% had other reasons. Here’s the result:
- 8% – emergency car expenses
- 13% – emergency medical expenses
- 9% – debt payments such as auto loans, mortgages, and credit card bills
- 6% – expensive and luxury items like electronics, appliances, and gadgets
- 6% – entertainment
- 6% – unspecified expenses
In spite of its high interests, 62.4% of people said a payday advance helped them save money since it didn’t involve bank fees. Meanwhile, 37.6% said they didn’t save money from using it.
Borrowers Insist They Were Aware of the Payday Advance Terms
Critics of payday advances portray the borrowers as victims who don’t understand what they’re getting themselves into. However, is it always the case?
The same survey states that 82% of the people who applied for payday advances looked at the fees and interest rate before agreeing. Meaning, only 18% didn’t.
More than three-fourths, or 75.5%, said they were well-informed of every step of the process. Only 24.5% said they were confused or misinformed.
Being well-informed helps prevent you from regretting your decision. That’s why we encourage you to understand the terms so you don’t end up with a bad experience.
Another criticism of payday advances is borrowers can’t pay them on time. This leads them to incur additional fees and eventually, being unable to pay the whole amount.
However, the survey again says otherwise.
Most of those surveyed, or 79.7%, said they paid their payday advance on time while only 9.3% were late. Those who had more than one loan, or 11%, said they’d both been late and on time.
Borrowers seem overall satisfied with payday advances. Despite the bad media, these remain popular among low-income communities and is unlikely to go anywhere.
We just hope that you educate yourself about a payday advance and its cons—especially the high interest rates.
A payday advance makes sense especially if you can’t have a traditional bank loan or other borrowing options. This also applies if it helps you avoid high late fees on other bills.
As the survey shows, payday advances help get people through their everyday lives. After all, without the basic necessities, we’re certain you’ll find it hard to survive in the first place.
Nevertheless, the final verdict was made.
Payday advances are less damning than the media suggest. And, in some cases, they’re the best financial option out there.
We always say it’s best to be informed and responsible when deciding how to spend your loans. As long as you’re part of this group, getting a payday advance is a decision you won’t regret.