Why Extra Caution is Needed When Opting for Internet Payday Lending
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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