Payday loans can be very dangerous if you fall victim to one of the predatory lending scams out there. If this is your last or only option, it is very important that you are as informed as possible before you sign a contract. Some payday lenders are not as trustworthy as others, and there are some things you should look for to prevent them from taking advantage of you.
Extremely High Interest Rates
While most payday loans come with high interest rates, you should definitely avoid those that seem higher than the rest. Some states have laws restricting how high payday lenders can set their interest rates, but not all. Make sure you read the fine print so you are aware of the interest rate, and don’t be afraid to shop around to find the best rate for you.
Predatory Payday Lenders
Sometimes, these lenders can be very difficult to spot, but there are a few things you should look for to recognize when they are trying to take advantage of you. The following are a few signs of predatory practices.
• Lenders who don’t consider your ability to repay – Many payday lenders don’t look into your financial background, but some of them do this because they are trying to get your money. They may try to convince you to take out the maximum amount because they count on you not being able to repay, which means your loan will continue to collect interest.
• Very strict terms about your postdated check – Again, this is a typical practice for payday lenders, but if there are terms that will result in a lawsuit if your check doesn’t go through, you should be very careful
• Mandatory arbitration clause – This clause means that you aren’t able to sue your payday lending company for taking advantage of you.
Hidden Terms
Not only do you have to worry about reading your entire contract for these predatory terms and conditions, but you also have to worry about the terms they aren’t showing you. Some companies will intentionally leave out these hidden terms until after you have signed the contract and taken the loan. The following are a few of the most common fees payday lenders try to hide.
• Service fee – This fee could be permitted in your state law, but payday lenders still try to use it to make more profit.
• Rollover fee – When you can’t repay your payday loan on the date agreed, most payday lenders will let you rollover the loan until the following payday. Your state laws should limit this type of fee, so make sure you know your rights.
• One-time membership fee – This fee is usually from about $10 to $15, but this small charge could be illegal.
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Vanessa Lang is an author who writes guest posts on the topics of business, marketing, credit cards, and personal finance. Additionally, she works for a website that focuses on educating readers about factors to consider with payday loans.
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