Payday Lender Red Flags

An unfortunate fact about the payday loan industry is that it is teeming with unscrupulous lenders. Especially in the online market, untrustworthy payday lenders abound. One of the most difficult tasks online payday loan borrowers face is trying to discern the good lenders from the bad. Selecting a quality lender essentially comes down to research—the more investigating you do about a lender, the better informed your decision will be. Aside from thorough research, however, you should also be vigilant about spotting certain red flags that will let you know you’re dealing with a dishonest lender. In this post, we’ll give you a list of these payday lender red flags.

What to Watch out For

As you’re selecting your payday lender, be on the lookout for any of these behaviors that might reveal an untrustworthy lender:

• The lender asks for an up-front fee. Avoid lenders that ask you for money up front before sending over your cash loan. Most reputable payday lenders will not charge you any fees, including an application fee, until your loan comes due. Lenders that ask for money up front are probably trying to take your money and run.
• The rates seem too good to be true. If you happen upon the site of a payday lender whose finance charges are drastically lower than all of the others you’ve seen, you should immediately be suspicious. If an offer seems too good to be true, it probably is. The lender probably entices borrowers with spuriously low rates only to bilk them in other ways.
• The lender is not asking the right questions. You may run across a payday lender that asks detailed questions about your bank account, routing number, social security number, etc., but they don’t seem at all interested in your employment information or income. This is a serious red flag that you might be getting scammed. A legitimate payday lender needs to know your employment information in order to determine your ability to repay the loan. Any lenders who aren’t interested in this information are probably out just to take your money.
• The site is devoid of valid contact information. Any good payday lender will have valid contact information clearly displayed on its website. You should easily be able to find the lender’s phone number, physical address, and email on the site. If you can’t find this information or if the information is invalid, move on to a different lender.
• The lender is not forthcoming about the terms of the loan. Not only is this dishonest, it is also against the law. The federal Truth in Lending Act mandates that lenders disclose the terms and APR of the loan ahead of time in your consumer loan agreement. The APR of the loan should be disclosed in bold on this agreement. If your lender withholds this information or fails to show you this agreement, don’t sign anything and find another lender immediately.