If you have poor credit, or a previous bankruptcy, it can be tough to borrow money from banks or credit unions. The payday loan business arose to offer short term financing to individuals with little or no credit, and the lenders are doing brisk business. There are now more payday loan stores in the United States than McDonald's, Burger King and Subway restaurants combined.
While they may be expensive, quick cash loans are, indeed, easy to obtain, and customers need only have a bank account and proof of income to qualify. The interest, or "fees" charged for such loans can amount to 400% per year on an annual basis.
An extension of the brick and mortar cash advance loan industry is the Internet lending business, and there are now hundreds of Websites that offer short-term loans. Internet loans are just as easy to acquire as financing from stores and they are always open. The convenience of transacting right from your home, rather than driving down to your local store, has encouraged countless people to borrow money online. The lenders say that they can put the cash straight into your bank account in 24 hours. Consumers should be aware, however, that borrowing from such lenders can be quite dangerous.
The risks associated with borrowing money from Internet lenders include:
Financial vulnerability - Theft from your bank account is a possible risk of doing business with an online company. You simply do not know who the online lenders are or what their motives might be. Since Internet lenders put money into your checking account, they could theoretically take money out of your checking account, as well.
Vague terms - If you live in Kentucky, your local lender is subject to banking laws established by that state and you are protected by those statutes. If you obtain cash on the Internet, the loan is bound by the laws of the jurisdiction in which the lender is physically located, but you may not be protected. If the online lender is located outside the United States, there may be no restrictions of any kind regarding how much they may apply. There may also be no recourse if the lender does not respect the terms of your agreement.
Potential identity theft or credit theft - By providing personal financial details to people that you do not know over the Web, customers face the risk of having their identity stolen. Identity theft or credit theft is a growing criminal enterprise and crooks who engage in it are becoming more proficient by the day.
There are often alternatives to cash advance loans, and you would be wise to seek them out rather than to borrow money at high interest. If you have to apply for a cash advance loan, you would be best served by doing so from a local lender, rather than on the Internet.
By: essmeier