Hidden Truths and Pitfalls About Online Payday Loans

There are some hidden truths about obtaining an online payday loan. Because of some laws passed in the protection of consumers against businesses, disclaimers must be posted about the specifics of any business practice. Conveniently for that business, these disclaimers are displayed in very fine print, as there are no laws on font that any business must use when disclosing this information. So grab your magnifying glass and look closely, because here is where you will find the hidden truths about online payday loans.

Because most people do not want to waste time reading all of the jargon regarding stipulations and this & that when it comes down to signing on the dotted line, companies will therefore keep such deterring information buried in a mass of text to discourage a thorough reading. They know that if the consumer paid close attention, they just may be out of landing the deal.

Online payday loans specialize in this type of misdirection. Perhaps this is because in their heart of hearts, they know that their business practices are unethical and prey on the weak. The portrayal of an online payday loan company, or any payday loan company for that matter, is one of a warming, caring company that is there to assist you (the consumer) in a financial bind. They are set up for small lending amounts, typically ranging anywhere from $200 - $1500. The borrower is then set up with a fee schedule and payment arrangements according to the amount borrowed and the frequency of their pay at work.

What You Should Know About Online Payday Loans Before Signing On the Dotted Line

If you've done a simple Google search about online payday loans, you would have noticed the abundant amount of hits that land your query. This should be the first flag. Wow! There are hundreds and even thousands of these online payday loan companies out there. What is the reason for this exactly?

Entering any one of these sites will take you to a page displaying attractive and luring advertisements to get you to take the bait. Often, time and money are the key terms used to get the ball rolling. This is because these companies know that if you are on their page, then you are desperate for money. However, instead of using good ethics and business practice to help the consumer, they instead utilize your misfortune for their own demoralizing gain.

To start off with, you may see an advertisement expressing how simple the process is; "Get A Loan Fast", "Only 3 Quick Steps", "Borrow up to $1,500 Quick & Easy", "Bad Credit-No Problem", "No Faxing, No Credit Check" and my favorite, "Get Instant Approval".

What these online payday loan companies fail to tell you however, unless you have your magnifying glass handy to read the fine print, is that they are not in fact quick and easy. They do require faxing of some sort and perhaps more importantly, not all of these online payday loan sites are actually lenders.

Online payday loan companies that require credit checks versus no credit check are less disheartening. However, make no mistake that they both will inevitably put you in more of a financial bind than you were to start out with. Online payday loan companies that ask for credit checks typically have lower interest rates, so the better your credit the more that rate can decrease. No credit check online payday loan companies however, will go for the gusto with regard to the interest they charge. This lies within the Annual Percentage Yield (APR), which can exceed well beyond 500%. This means that paying off your initial loan over an extended period will result in you eventually paying more in interest than the actual principle amount borrowed.

Take this scenario for example: You go through all the tedious work required and finally obtain a small loan for $250. For every $50 you borrow, you are to pay back $15 in interest. This seems minor and maybe even fair enough at first, but where it gets tricky is with the fee schedule. So, the $250 you borrowed will mean you will owe $325 right? Sure this is true if you were to pay the balance back in full on your next check, but ideally this is not the case, or else you would have simply cut your losses and just waited till your next check to come in. Instead, most borrowers will pay the interest owed or the interest owed plus a small portion of the principle to work it down. If you paid the $75 in interest and another $50 on the principle, then your new balance will be $200 on principle and $60 in interest according to the $15 per $50 borrowed. However, you've just paid $125 altogether this week just to get to that point. Staying on a payment schedule such as this will result in the principle being paid off in a matter of 5 weeks, while the interest paid will amount to $225. At nearly the amount you've initially borrowed, the online payday loan company just about made 100% in profits of what they've loaned you. In the end, you have created an added expense of $225 dollars on top of the bills you've already acquired which led you to taking out the online payday loan in the first place.

Again, this is an ideal scenario, which means prolonging repayment will only result more interest paid and furthering your debt overall.

Other Hidden Truths of Using Online Payday Loans

As I have stated earlier, online payday loan companies will lure you in with their attractive advertisements of no faxing, calling or long waits. However, they all operate on one having a checking account, to ensure repayment and this means that "yes", there will be faxing and even calling involved. Your general demographic information given on the site only gets you to the "pre-approval" stage. Rest assure, that a representative will be calling you shortly to have you fax in a 30-day bank statement, along with a voided check, information about your place of employment, references and may even require your social security number. Obtaining all of this added information and delivering it around your already busy schedule may take a few days, and if you find yourself ready by Wednesday, after applying on Monday, then why not just wait till Friday for your next check and avoid the sharks of online payday loans entirely.

The Misleading Factor of Online Payday Loans

Another important factor to watch out for is the misleading factor. Once again, pull out that magnifying glass and read the fine print of the disclaimer. You can usually find it somewhere on the initial page before releasing any of your information.

The reason there are so many online payday loan sites out there is because most of them are not actual online payday loan lenders. Instead, as the disclaimer will explain, they merely act as a medium between you and real online payday loan companies. They will take all of your information, even the most sensitive stuff and then disperse this information throughout the many online payday loan companies in which they are affiliated with. This will immediately start a domino effect of countless emails and phone calls from third party vendors trying to get your business for an online payday loan. Some of these vendors in fact, have nothing to do with online payday loans, but instead may be questioning you for things like going back to school, becoming a mystery shopper, or even obtaining a car loan. The point is that these non-lending online payday loan sites are vicious and known to simply sell your personal information to third party vendors for their own personal gain, all while leaving you stuck with dealing with countless emails, texts and phone calls from annoying vendors for weeks on in.

When it comes down to it, the bottom line is to stay far away from online payday loans, or any payday loans for that matter, if at all possible. The end result with dealing with these modern day loan sharks will cause more damage to your financial situation than actually helping it.


Payday Loan http://en.wikipedia.org/wiki/Payday_loan Wikipedia