How to Choose a Payday Loan Company
Examine the lender’s advertising practices., Choose lenders that are tied to larger institutions., Check the lender’s license., Watch out for incentives., Beware the practice of multiple loans., Avoid lenders who use Native American lands.
Step-by-Step Guide
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Step 1: Examine the lender’s advertising practices.
Reliable lenders will engage in sound advertising practices.
They will clearly disclose their interest rates and their repayment expectations.
They must also clearly disclose any limitations or conditions on the loan, so you have the opportunity to understand the full terms before accepting.
If any of this is missing or unclear, then you need to question whether you are dealing with a reputable business.
Any omissions or errors in their advertising practices should lead you to question whatever other information they may not be telling you.A reputable lender is likely to have a poster or sign that visibly displays the day's interest rates.
If you cannot readily identify the terms of the loan, you should be suspicious of that lender.
If you are considering a loan from an online payday loan service, look for a clear statement of interest rates, or a clear link to that information.
If you have to jump link after link after link, and still cannot find the information, the lender is probably trying to hide the information from you. -
Step 2: Choose lenders that are tied to larger institutions.
Lenders that diversify in different types of loans may be a bit more credible than other small, fly-by-night companies.
Some statewide or even national lending institutions have entered into the short-term small loan market (i.e., “payday loans”).
Such lenders are more likely to follow reputable lending practices than small, independent lenders that might just operate out of a single shop on a street corner. , Approximately half the states in the U.S. and the District of Columbia have enacted legislation that allows payday lenders to operate.
The same legislation requires those lenders to obtain licenses to be allowed to operate in the state.
The license indicates that the lender has been examined by state or federal regulators and generally follows approved business practices.
Before you borrow from a payday lender, you should ask for their license number.You can contact the office of the Attorney General of your state to verify a license number or to find out if a lender has a clear history. , Some lenders may actually try to make their payday loans appear positive by adding certain incentives to get you to borrow from them.
They may advertise limited credit checks or easy borrowing terms.
While these may seem like good things, they are actually evidence of a disreputable lender who does not engage in sound lending practices.If you are certain that you will be able to repay the loan when initially due, these incentives may work in your favor.
However, if you have any problems with repayment on time, the lender’s reputable business practices may become more of an issue for you. , In some states, the law restricts short term loans that exceed certain amounts.
To get around these laws, lenders will break up a large loan into multiple smaller loans that stay under the limit.
In this way, they can charge fees or set due dates that otherwise would violate the law.
If your lender recommends creating two or more loans out of one, you should be cautious.For example, two-week loans in Mississippi may not exceed $250.
However, a lender may recommend that you take out four $100 loans at the same time and thereby avoid this law. , One trick that some payday lenders use is to locate their business on lands belonging to recognized Native American tribes.
Such land is generally exempt from state and federal regulations.
By doing this, the lenders can issue loans without adhering to consumer protection laws.
While the loan may serve your immediate need, you may lose certain rights that are put in place to protect you. -
Step 3: Check the lender’s license.
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Step 4: Watch out for incentives.
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Step 5: Beware the practice of multiple loans.
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Step 6: Avoid lenders who use Native American lands.
Detailed Guide
Reliable lenders will engage in sound advertising practices.
They will clearly disclose their interest rates and their repayment expectations.
They must also clearly disclose any limitations or conditions on the loan, so you have the opportunity to understand the full terms before accepting.
If any of this is missing or unclear, then you need to question whether you are dealing with a reputable business.
Any omissions or errors in their advertising practices should lead you to question whatever other information they may not be telling you.A reputable lender is likely to have a poster or sign that visibly displays the day's interest rates.
If you cannot readily identify the terms of the loan, you should be suspicious of that lender.
If you are considering a loan from an online payday loan service, look for a clear statement of interest rates, or a clear link to that information.
If you have to jump link after link after link, and still cannot find the information, the lender is probably trying to hide the information from you.
Lenders that diversify in different types of loans may be a bit more credible than other small, fly-by-night companies.
Some statewide or even national lending institutions have entered into the short-term small loan market (i.e., “payday loans”).
Such lenders are more likely to follow reputable lending practices than small, independent lenders that might just operate out of a single shop on a street corner. , Approximately half the states in the U.S. and the District of Columbia have enacted legislation that allows payday lenders to operate.
The same legislation requires those lenders to obtain licenses to be allowed to operate in the state.
The license indicates that the lender has been examined by state or federal regulators and generally follows approved business practices.
Before you borrow from a payday lender, you should ask for their license number.You can contact the office of the Attorney General of your state to verify a license number or to find out if a lender has a clear history. , Some lenders may actually try to make their payday loans appear positive by adding certain incentives to get you to borrow from them.
They may advertise limited credit checks or easy borrowing terms.
While these may seem like good things, they are actually evidence of a disreputable lender who does not engage in sound lending practices.If you are certain that you will be able to repay the loan when initially due, these incentives may work in your favor.
However, if you have any problems with repayment on time, the lender’s reputable business practices may become more of an issue for you. , In some states, the law restricts short term loans that exceed certain amounts.
To get around these laws, lenders will break up a large loan into multiple smaller loans that stay under the limit.
In this way, they can charge fees or set due dates that otherwise would violate the law.
If your lender recommends creating two or more loans out of one, you should be cautious.For example, two-week loans in Mississippi may not exceed $250.
However, a lender may recommend that you take out four $100 loans at the same time and thereby avoid this law. , One trick that some payday lenders use is to locate their business on lands belonging to recognized Native American tribes.
Such land is generally exempt from state and federal regulations.
By doing this, the lenders can issue loans without adhering to consumer protection laws.
While the loan may serve your immediate need, you may lose certain rights that are put in place to protect you.
About the Author
James Armstrong
Specializes in breaking down complex cooking topics into simple steps.
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