Pay-day
Loans
List of things that you must keep in mind while applying for a pay-day
loan
• Think before taking a payday loan: check whether you can do without it. These loans have extremely high interest rates and are best avoided.
• You should keep in mind the APR factor of the loan before taking it. You should find the company which is charging a lower APR than its competitors.
•You should take care about the privacy of your document and
information. So, if the tendency of the company is to process
applicant's information in an encrypted page, you should think
that your information will not be leaked out, and then you can
proceed on.
• You should read the company policy and legal matters
complied with before submitting an application form to them.
• Consumers should shop for lower cost credit, comparing
both the dollar finance charge and the APR to get the lowest
cost credit available.
Online payday loans are marketed through e-mail, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, Social Security Numbers and employer information. Borrowers fax copies of a check, a recent bank statement, and signed paperwork. The loan is direct deposited into the consumer's checking account and loan payment or the finance charge is electronically withdrawn on the borrower's next payday.
The Consumer Federation of America (CFA) is warning consumers to exercise extreme caution when using Internet payday loan sites, where loans due by the next payday, can cost up to $30 per $100 borrowed and borrowers typically face annual interest rates (APRs) of 650%. According to a CFA survey of one hundred Internet payday loan sites, small loans involving electronic access to consumers' checking accounts pose high risks to consumers who borrow money by transmitting personal financial information via the Internet. Many surveyed lenders automatically renew loans by electronically withdrawing the finance charge from the consumer's checking account every payday. If consumers fail to have enough money on deposit to cover the finance charge or repayment, both the payday lender and the bank will impose insufficient funds fees.
Contracts from Internet payday lenders include a range of one-sided terms, such as mandatory arbitration clauses, agreements not to participate in class action lawsuits, and agreements not to file for bankruptcy. Some lenders require applicants to agree to keep their bank accounts open until loans are repaid. Others ask for "voluntary" wage assignments even in states where wage assignments are not legal.
Payday loans are a form of specialized lending not typically found in state non-member institutions, and are most frequently originated by specialized non-banking firms subject to state regulation. Payday loans can be subject to high levels of transaction risk given the large volume of loans, the handling of documents, and the movement of loan funds between the institution and any third party originators. Because payday loans may be underwritten off-site, there also is the risk that agents or employees may misrepresent information about the loans or increase credit risk by failing to adhere to established underwriting guidelines.
In recent years a number of lenders have extended their risk selection standards to attract sub-prime loans. Among the various types of sub-prime loans, payday loans are now offered by an increasing number of insured depository institutions.
Pay-day
Loans
What should be taken into consideration while taking a payday loan?
