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How to Choose the Right Online Payday Loan

[Dec 26, 2008.]


Online payday loans are quickly gaining popularity among the Internet generation. Consumers that need quick cash for unexpected expenses can skip the face-to-face and get right to the offer. The Payday Loan Reform Law polices online lenders to ensure that they are treating the customer fairly. Despite these protections, you’re still responsible for verifying the legitimacy of online payday loans. Here’s what to look for.

Know the Payday Loan Reform Law
One of the moves state congresses have made to help borrowers avoid succumbing to unscrupulous lenders is by passing the Payday Loan Reform Law. To date, 15 states and the District of Columbia have ended predatory payday loans at triple-digit interest rates. All participating states are enforcing interest caps of 36% or less. In effect, each state falls into one of three categories:

  • Category One. Payday lenders follow the state’s small loan laws that set the interest cap comparably low. States in this category also regulate lengths of the loans and prohibit contract revisions by the lenders. This type of strict structure makes it virtually impossible for payday lenders to make a profit.

  • Category Two. Sates allow lenders and consumers to agree on any predetermined interest amount. Lenders can modify their interest rates as long as the borrower agrees to that amount. These states must also adhere to the state’s small loan acts.

  • Category Three. Payday loans are limited to certain restrictions with respect to maximum interest amounts. For example, some lenders can only charge up to 15% on a maximum loan of $300. The government regulates how much consumers are being charged for lending services as well as how much debt a person can be in with a lending company.

Online Payday Loans Offer Convenience--Provided They are Legit
In most cases, online payday loan lenders are legitimate. They also must adhere to the Payday Loan Reform Law and offer lending in-person, over the phone, and via fax or e-mail. The online option is simply an added convenience. Still, you can always check if your potential lender is in current standing with the Better Business Bureau and has no outstanding unresolved complaints.

The vast majority of illegitimate online payday loans come from scams such as e-mail and phishing attempts. In most cases, a payday loan offer initiated from an unknown e-mail account should draw your suspicion. If you’re unsure if an e-mail or web site offer is lawful, it just makes sense to pass. Take your business to an established provider with a track record of satisfied customers.


About Author:

Kelly Richardson is a freelance writer, marcomm consultant and digital entrepreneur. He’s written content for Fortune 500s Google, Yahoo!, Microsoft and Wells Fargo. Find out more about him at kellyrichardsoncopywriting.com.

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