Some would read the title of this article and say the only good tip is “DON’T use internet payday lending.”There is good reason to feel that way. Many internet payday lending site operators have been accused of illegal practices and of intentionally trapping borrowers into loans that were impossible to ever pay off.
There are some reputable online payday lenders, but even the best payday loans have their negatives. Below are five tips for using internet payday lending.
Know the Company
A quick search for internet payday lenders will give you several options. Some of the lenders also operate brick and mortar stores. Others do not. One way that you can be sure that you are dealing with a legitimate payday lender, rather than someone who just wants your bank account information, is to go with a lender who also has retail locations.
Some of the biggest retail payday lenders in the country, such as Check into Cash, also offer internet loans.
Of course some internet lenders who do not operate retail locations are legitimate, but it is hard to separate the good from the bad.
Read the Fine Print
When agreeing to an internet payday loan, you should read all of the fine print very carefully. Don’t just skim the main points as you might miss something important. Some of the things you must make sure to understand are when the loan is due, what will happen if you cannot make the payment on time and how you can pay off the loan early.
Some borrowers have been shocked to learn that they could not pay the loan off early or that the loan automatically rolled over – resulting in additional fees – unless they told the lender otherwise.
Talk to Someone
While the convenience of taking out a payday loan online is appealing to some people, it is still important to talk to a live person. Most internet payday lending sites make it easy to apply for the loan, get approved, have the money deposited into your account and payments taken out of the account without ever having to speak to anyone.
That makes it easy, sure, but it’s not smart. Even if it is not required, be sure that you call the numbers listed on the site. Note how easy it is to get a live person on the phone. If there are not any numbers listed, of if getting a live person proves difficult, move on to a different lender.
If you can’t get someone on the phone when you are trying to give them your business can you imagine how difficult it will be to get someone on the line once you are already a customer?
Pay it Off
One of the best tips you can get regarding any payday loans – internet or otherwise – is to pay the loan off as soon as possible. When you pay the loan off early, you greatly reduce the amount of interest that you have to pay. It is important to note that the reduction for paying the loan off early does not apply to fees, such as application fees, but only to interest.
When taking out an internet payday loan, be sure that you know you have the option of paying the loan off early, exactly how you would go about doing so and how much you can save by paying it off early.
Automatic Rollover?
As mentioned above, some internet payday lending sites will automatically rollover your loan unless you notify them that you do not want them to do that. The best way to avoid this is to find a lender that does not automatically rollover the loans.
If you cannot find one, then be sure that you fully understand what you need to do to stop the loan from being automatically renewed. If you need to write a letter, make sure you send it certified mail so that you can be sure it was received.
If they tell you that you just need to call, be sure to get a confirmation number. If they do not give confirmation numbers then send a certified letter as a backup.
Internet payday lending is convenient, but that convenience is not without risks. Choose the lender wisely to minimize the risk of having a negative experience with your payday loan.
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Internet payday lending is a booming industry that continues to grow. Some online payday lenders are large companies that also operate retail lending locations. Others are run by small operators who work strictly online. Other sites that appear to be payday lenders are nothing more than sites set up by scammers in an attempt to collect bank account and other information from those applying for a loan.
While internet payday lending offers a convenient alternative to the retail versions of these loans, there are important questions you should ask before using a online payday lender. Below are three of the most commonly asked questions about internet payday lending.
How Do I Know if a Lender is Legitimate?
As with any other type of online business, it is difficult to tell just by looking at a website if a business is on the up and up. One of the best things that you can do to be assured that you are working with a reputable lender is to choose one that also has brick and mortar stores.
Many of the largest payday lenders in the country, including Check into Cash and Advance America, also operate online lending sites in some states.
You should also check with the Better Business Bureau and run a quick Google search of the site name to see if any past customers have blogged about bad experiences with the company.
NOTE: If you find nothing but glowing reviews, take them with a grain of salt. Some businesses pay writers to flood the internet with good reviews about their products and services.
Are the Interest Rates the Same?
The interest rate that you will pay for an internet payday loan will be very similar to what you would pay for a retail payday loan. Both charge very high interest rates that range from 200% to over 1300% APR. There is no getting around the high interest rate, but you may be able to save yourself some money by paying the loan off early.
With retail lenders, doing that is as easy as walking into the store. With online lenders, however, some have run into trouble when they tried to lower the amount of interest they would have to pay by paying the loan off early.
Some online companies make it extremely difficult to pay the loan off in full before the due date. You must read all of the fine print thoroughly to be sure that you know exactly what you need to do should you want to pay the loan off early.
Those looking for payday loans, online or retail, shouldn’t put too much effort into finding a low interest rate. Even if a company advertises very low rates, they add additional fees. The bottom line is that there is no such thing as a truly low-interest payday loan.
Are There Drawbacks to Using Internet vs. Retail Payday Lenders?
Yes, there are. While the convenience of being able to handle the entire loan process without leaving your home is appealing, you must weigh that convenience against the possible drawbacks.
One of those was discussed above and concerns paying the loan back early. Some borrowers have reported sending in a check to pay off the loan well before the loan was due. The lender simply did not cash the check and continued to charge interest and debit the agreed upon payments from the borrowers checking account.
Another negative to online payday loans is that many of them automatically rollover. This is rarely the case with retail payday loans. Unless you pay the loan off in full and notify the lender that you do not want the loan to continue, there is a good chance that your internet payday loan will be rolled over.
Another obvious drawback is the inability to go to a store and talk to someone face to face should you have a problem. If you may not be able to meet a loan payment for a retail loan, they will often grant you a few extra days if you go to the store and talk to the lenders. This is not the case with internet loans.
At best, you will be able to talk to someone on the phone, but the interactions will lack the power of an in-person conversation.
Internet payday loans will continue to have their place as long as consumers continue to use them. Just keep in mind that there are drawbacks and be sure that you read all of the fine print before you agree to take a loan.
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If you live in a state where payday loans are allowed, then you have the option of choosing between retail lenders or online lenders. Some would like to avoid the hassle and embarrassment of going to a brick and mortar store to get a payday loan, so they opt instead for an online loan.
While the convenience of internet payday lending is one thing to consider, it is also important to take be extra cautious when dealing with internet lenders. Below are some of the reasons.
Scammers
This should not be a surprise, but many sites that look like legitimate internet payday lending operations are really nothing more than someone’s attempt to collect bank account numbers. It is difficult to spot a scammer’s site since many of them look legitimate.
The best way that you can know that you are dealing with an actual payday lender is to choose one that is well-known and also operates retail locations. Some lenders, such as Advance America and Check into Cash, operate both online and in retail settings.
It is important to understand that not all payday lenders who operate solely online are scammers, but it is difficult to weed out the good from the bad. Choosing a well-known lender is one way to know the lender is legitimate.
Automatic Rollover
With retail payday loans, it is rare that the loans will automatically rollover. Instead, you will have to pay the loan off, and then start over to take out another loan. This is not the case with many internet payday lenders.
Instead, unless you tell them otherwise, the loan will continue to rollover month after month. This usually results in ever increasing fees as the principal balance continues to grow.
The best choice is to find a lender who does NOT automatically rollover the loans. If you cannot, be sure that you understand exactly what actions that you need to take in order to stop the loan from rolling over. If you need to send a letter, be sure to send it certified with a return receipt requested.
Even if the lenders say a phone call is all it takes, it is a good idea to send the certified letter anyway. Of course, you should keep a copy for your records and hang on to the return receipt so that, if there are any questions, you will be able to prove the date on which the lender received the letter.
Direct Debits
What some would consider a major drawback to online payday loans is the use of direct debits for the payments. In most retail payday loan settings, you would either make the payments in person or through a post-dated check that you left with the lender at the time you took out the loan.
With most online lenders, the payments are made through direct debits from your checking account. When you take the loan, you agree to allow the lender to have direct access to your checking account for the payments.
Many consumer protection groups say that you should never allow any company such direct access to your accounts, but if you use an online payday lender, there may be no way to get around it.
Lack of Oversight
Retail payday lenders are subject to the laws in the states in which they operate. While online payday lenders are also subject to regulations, it is a bit tougher to oversee their operations. In fact, there are even retail payday loan centers operating openly in states where it is illegal to do so. Whether this is lack of man power or simply the powers that be turning the other cheek, the problem exists to an even greater extent with online payday lending.
While there is a list of drawbacks to using internet payday lending options, there are many people who do use the loans with no problem. Using extra caution is important to be sure that your online payday loan transaction is as smooth as possible.
Learn what to look out for and then try to find payday lenders that do not participate in questionable practices. As with any other type of online transaction, buyer beware.
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When having a discussion about internet payday lending, it is important to point out that many payday lending sites are run by those who want to take advantage of consumers and who employ tactics that are, at best, unethical and, at worst, illegal. For the purposes of this article, only reputable internet payday lenders will be discussed.
How Does it Work?
Internet payday loans work in a very similar manner to retail payday loans. The big difference, obviously, is that you handle the transaction online rather than in person.
After choosing a lender and filling out an online application, you will usually find out within minutes whether you loan was approved or not. As with retail payday lenders, a credit check is not usually part of the approval process. Instead, lenders will just need to verify your bank account and employment information.
Also, in states where the number of payday loans allowed is limited, the lender will need to make sure that you have not taken too many loans in the specified period of time.
When you go to apply for an internet payday loan, you will need the following information:
Name, phone number and address of your employer
Gross monthly income
Frequency of pay and your next pay date
Bank account routing number and account number
Once approved, the money will usually be directly deposited into your bank account. In most cases, this happens within one business day.
For some, this process is very convenient. Without ever leaving home you can apply for the loan, have the money deposited into your bank account and have the payment automatically deducted.
Who Qualifies?
It is fairly easy to qualify for most internet payday loans. As mentioned above, a credit check is not part of the approval process. To qualify, you must have an active checking account in your name and a verifiable place of employment.
As long as you meet those two criteria, you will probably qualify for a payday loan.
The amount that you will qualify for will be based on your monthly income.
How Do I Make Payments?
In most cases, payment for an internet payday loan will be automatically deducted from your bank account. For retail payday loans, you would go into the store on the due date to make the payments. Because this is not possible with internet loans, the amount is deducted automatically.
In some cases, the lender will allow you to send a check for payment, but this is the exception rather than the rule.
What are the Negatives?
As with any payday loans, there are some negatives to consider. First is the high interest rate which can range from 200% to over 1300% depending on the amount borrowed and the length of the loan.
Another point that could be a negative to some borrowers is the fact that the entire loan must be paid back in either one or two payments. There are some lenders that will extend the payments, but most require payment in full within one to two pay periods.
When dealing with internet payday lenders, you also have to consider that there is no one to talk to in person should you have a problem with the loan or with making an agreed upon payment. Sometimes, when dealing with a retail payday lender, you will be able to ask for an extension on a due date or make other similar arrangements. With an online loan, this is not usually possible.
Also, with online lenders, you are agreeing to let someone have direct access into your checking account to withdraw the loan payments. Many consumer protection advocates advise strongly against allowing anyone to have such access to your accounts.
In general, online payday loans work much like retail payday loans. As you can see, however, there are some important differences that must be considered when making the decision to use an online lender versus an internet lender.
Finally, if you do choose to go with internet payday lending, you should choose a lender that also operates brick and mortar stores. This will just provide a layer of assurance that you are dealing with a legitimate lender rather than handing all of your information over to some fly by night operation.
