Does Fed study recommend payday loans?

Payday loans offer better alternative to credit cards

The habit of swiping a credit card is very popular but the consumers often fall into the trap of revolving interest and end up paying huge costs for their credit. The magic of credit cards tempt a buyer to buy more and thus use the plastic card more, and ultimately make the card companies earn handsome profits, with you paying interest fees every month.

On the other hand, payday loans are short term loans for a definite and small period of time and the amount is much lower than those offered by your credit card limits. Payday loans are used for fulfilling your short term needs and should not be used for impulsive buys.

Many studies have tried to establish a link between payday loans and financial wreckages by saying that payday loans are a bad choice when compared to credit card liquidity. However, the reason why consumers make such choice is not clearly defined in the various studies.

The authors have mentioned that Payday lenders use Teltrack scores instead of the FICO scores used by the credit card issuers for analyzing the credit history of the borrower. As Teltrack scores are considered much more effective than the FICO scores, they assume that Teltrack scores alone can result in more successful payday loans and less defaults.

It is interesting to note that the study pointed out that about 56% of payday loan users had liquidity available in their credit cards but had not used it throughout the year. There must be some reason behind their doing so. A closer study is required to find out why people avoid falling into the revolving interest trap of the credit cards.

Consumers who take payday loans may not have a high FICO score yet they can get a payday loan for a fixed period of about two weeks. As there is no system of revolving credit in payday loan, there is no chance of the customer falling into the trap of spiraling high interest, as in the case of credit cards.

The payday loans which are obtained after referring to Teltrack scores are not usually recorded in your credit history. The credit card companies do not use the Teletrack information as the credit bureaus charge them for each query and the leverage that they expect to gain is not enough to justify the expense.

If you believe that the damage has been already done to your credit history by your defaulting in credit card payment, it is always recommendable to opt for payday loans. It works out to be a better option.

Apply now for a no teletrack payday loan by filling out our secure form to the left. Our form is specialized to match you with an online lender who will work with your personal situation for the best rate and loan. No credit check is required.

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