Safeguard Yourself When Borrowing Money Online

February 8th, 2011 |

Desperate times are leading people to the Internet to apply for payday loans and many are falling deeper into debt after getting tangled up with a lender who has zero regard for the law. Unlike a payday advance loan that you might get from a local business, online payday loans require your bank account number and, as a result, the borrower is at the mercy of the lender as more money than they counted on is withdrawn from his or her account.

When you apply for a loan online, you are giving a lot of personal data including your checking account number and, of course, your name address and employment information over the Internet. With identity theft running rampant, you would be wise to apply only at trusted websites and with trusted companies.

You may not even know for sure who your information is going to when you have pop up windows that encourage you to apply for payday loans. It would be wise to not apply right off the bat. There are many sites that ask for your basic information such as your name, phone number, email address and how much you are looking to borrow.

That information is then passed on to payday advance companies who will then contact you about your inquiry for money. This is when you would research each individual company to find out how legitimate they are. You want to make sure that the lender you choose is not overseas.

The reason for this is because payday lending laws are different in every country and if you are in a dispute with an out of country lender, you may have difficulty resolving it if their laws are quite different than those in the U.S.

But to whom are you giving this information? More than likely you won’t have a clue. Many web sites that pop up when you do a search for something such as “payday loans” aren’t lenders at all. You can find some disclaimers on these sites that state that they are not lenders at all and they are just a connecting middleman.

A Consumer Federation of America (CFA) survey, of 100 online payday lenders and referrals sites, found that many are run from outside the United States and, perhaps, out of reach of American laws. It is wise to try your best to find contact information. If there are no phone numbers or addresses listed, beware.

Try to avoid PO Boxes as well, you want a physical address that you can research. It is easy nowadays to make legitimate looking websites and some of these could be identity thieves who will take you for all you are worth. So beware.

Payday advance lenders who have physical locations are represented by Community Financial Services of America, a trade association. Online payday lenders have no such organization and, therefore, have no one to represent them.

The sound advice goes for any area of business – do your research and be a smart consumer instead of a blind one and all should be well. The best ways are to try and find reviews of that specific company to see what kind of experiences people have had with them.

You can try to find information on the Better Business Bureau website as well. People who have had bad experiences commonly complain that the arrangement quickly turns into a debt spiral. They state all of their subsequent payments went toward paying off recurring finance charges and never toward the principal.

As a result, they report paying two and three times the amount of the original loan and still having the same amount of principal to pay off. Many complainants were surprised to learn that the online lender was not licensed by the state and charged interest rates well over what was allowed by their state usury laws.

When confronted, the lender typically responds that they don’t have to follow state or federal laws – often claiming that they are based in another country or on Native American reservations and are sovereign nations.

Look for red flags. Unscrupulous online lenders often wave the same red flags including not being forthcoming about their location or contact information. Also be cautious of any lender that doesn’t ask you for any background information outside of your bank account number.

About the Author

Jack R. Landry has a PHD in financial services and has written hundreds of articles relating to consumer services and Utah Money Center. He has been a consumer advocate for nearly 25 years.

Contact Info:
Jack R. Landry
JackRLandry@gmail.com
http://www.checkcity.com