Most of the payday lenders you will find online are reputable and follow all state laws about giving short-term loans. However, there are some unscrupulous lenders out there which prey on people in need. They usually will offer seemingly attractive payday loans only to hide large fees or other unfavorable terms in the fine print. Here are some of the ways you can tell whether a payday lender is trustworthy or not.
Asking for fees up front: Watch out for any payday lenders which ask you to pay fees up front. Usually, this will be done in the form of an application fee and then your application will be denied (they basically take your money and run!). Some other payday lenders are a bit trickier. They ask for the lending fees up front, which seems illogical but is really a ruse to make you pay more. Let’s say that you need $300. If the lender requires you to pay $30 in fees up front, then you will actually have to take out a loan of $330 just to cover the fee amount! Then you will lose more money by paying interest on this additional $30.
The rates seem unbelievably low: If something seems too good to be true, then that is probably the case. Make sure you do some shopping around before you choose a payday lender so you know what to expect and what is realistic. If the rate is very low, there are most certainly some other fees hidden which can take a major toll on you later.
The lender asks certain questions: Be wary of identity thieves posing as payday lenders! This won’t happen at established payday loan websites but could happen at newly-established sites (the thieves will open a website for a few days, collect information, and then move on so they cannot be traced). Watch out for any payday lender which doesn’t ask into your employment history but is very interested in you SS number and bank account details.
There is no contact information: All payday lenders should provide contact information including an address, name, and phone number (you may have to ask for the phone number). Check with an online map or address directory to make sure that the address really exists and is what it says it is (like the address isn’t located somewhere in the Hudson River!).
The lender doesn’t disclose all information about the payday loan: Under the Truth in Lending Act, all lenders must disclose all information about loans. Your payday loan contract should have all terms listed including APR, fees, and default payment terms. If you can’t find this information given openly, then move on to another payday lender!