Online Payday Loans: 4 Common Pitfalls to Avoid

[Jun 19, 2009.]

 

Payday loans are fast becoming a viable financial option for consumers who need a few extra dollars but have neither the credit nor the borrowing history to access traditional banks. However, as with any lending situation, online payday loans aren’t without their inherent dangers. Here are four common pitfalls associated with on-line payday loans and how to sidestep them.

1. Online Applications. It’s been one of the primary selling points for online payday loans that the web-based application is quick and convenient. But the U.S. Government Info section of About.com warns otherwise. The blog cites a Consumer Federation of America survey that reveals that transmitting personal financial information via the Internet can be dangerous. This holds especially true for small loans involving electronic access to checking accounts.

2. The Revolving Loan. Some on-line payday loans offer borrowers the option of renewing the loan at the end of the agreement. Here’s where the infamous “cycle of debt” can get consumers in deep water. The state of Wisconsin Department of Financial Institutions advises borrowers to avoid taking out multiple payday loans or signing on to a revolving loan situation. You’ll most likely put up a check to cover the loan amount that the payday loans lender will deposit at the end of the period. Make sure there’s money to cover it.

3. Lenders in a Box. The payday loans lenders that give the industry a bad name are ones that pop up and disappear on a moments notice. Or the ones that are connected to other business ventures, such as check cashing facilities, package stores, or other vice-relate establishments. Always choose a lender who is grounded in the community with a long list of satisfied customers. Also, avoid the hard sell, which may insinuate desperation on the part of the lender.

4. Military Madness. If you’re currently serving in the Armed Forces, there are a host of situations that might encourage you to seek out online payday loans aimed specifically at service members. Current legislation is attempting to protect military personnel. But until it is enacted, you’re responsible for your financial situation. ArmyTimes suggests service members start with military banks and credit unions before even considering on-line payday loans.

On-line payday loans are certainly the by-products of bad press as of late. But they can be helpful if approached the right way. The care you take when researching online payday loans should mirror the fiscal responsibility you exhibit with buying a home or car, financing a college education, or investing in a 401K.

 

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.