How to Choose a Payday Loan Company: Reviewing the Lender’s Validity

Examine the lender’s advertisement practices.

A reliable payday lender will follow ethical advertising methods. They will be clear about the interest rate and repayment plans. They should also make clear the terms and conditions of the loan, so that you are able to comprehend the complete terms before committing to. If any of this information is unclear or not clear it is time to be skeptical about whether you’re dealing with a reliable company. Any mistakes or omissions in their marketing practices must be a cause for you to reconsider any other information they might not be able to provide you with. [1]

  • A trustworthy lender will likely have a sign or poster which clearly displays the current interest rates. If you are unable to clearly determine the conditions for the loan it is best to be cautious about the lender.
  • If you’re thinking about taking out a loan through an online payday lending service be sure to look for a clear rate of interest, or a direct link to the information. If you need to jump links after links and are unable to find the details the lender may be trying to conceal the information from you.

Select lenders who are linked to bigger institutions.

Diversifying lenders who offer a variety of kinds of loans might be a little more reliable than the other fly-by-night, small firms. Certain national or state-wide lending institutions have stepped into the market for short-term small loans (i.e., “payday loans”). They are more likely to adhere to ethical lending standards than smaller independent lenders that only operate from one store on a corner.

Check the license of the lender.

Nearly half of states of the U.S. and the District of Columbia have passed legislation that permits payday lenders to be operating. The same law requires lenders to get licenses in order to be permitted to operate in the state. The license proves it has passed scrutinized by the federal or state regulators and generally adheres to approved business procedures. If you are considering borrowing from payday lenders You should inquire for the license numbers of their lender. [2]

  • Contact the Office of Attorney General in your state to confirm a license number, or find out whether the lender has a solid track record.

Keep an eye out for rewards.

Some lenders might attempt at making payday loans appear positive by providing certain incentives to encourage customers to take out loans from them. They may offer limited credit checks or simple terms for borrowing. Although these might seem like good things, they often signal that the lender does not practice prudent borrowing practices. [3]

  • If you’re certain you’ll be able to pay back the loan before it is due, these rewards could be beneficial to you. However, if you’re having difficulties with the repayment deadline, your lender’s reliable business practices could be more problematic for you.

Beware of taking multiple loans.

In certain states, laws restrict short term loans that exceed certain amount. To avoid these restrictions lenders split a large loan into smaller loans to are kept under the limit. In this manner they are able to charge fees or establish deadlines that would otherwise be in violation of the law. If your lender suggests creating multiple loans out of one, it is best to be wary. [4]

  • For example, two-week loan amounts in Mississippi cannot exceed $250. However, lenders may suggest taking from four 100-dollar loans at once to avoid the law.

Avoid lending to companies that make use of Native American lands.

One method that payday lenders employ is to locate their businesses on land belonging to recognised Native American tribes. The land in question is usually exempt from federal and state laws. In this way, lenders are able to issue loans, without requiring compliance with the laws protecting consumers. While the loan could meet your immediate needs but you will lose certain rights created to safeguard you.

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