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Everyone has heard the numerous rumors surrounding the popular payday loan industry and its supposed “negative tactics” and “unethical techniques”. It’s also not hard to find an internet blog or two about the “outrageous interest rates” or “horrible customer service” in relation to the payday loan process.

With so many negative and untrue allegations floating around, perhaps there is a need to dispel some of the rumors. Take a moment to read through the top five most circulated payday loan rumors below. You might be surprised to learn the truth about these heavily published myths.

TOP FIVE RUMORS ABOUT PAYDAY LOANS

5. Payday loans are full of expensive hidden fees.

All potential fees are clearly described in the agreement each customer must sign before attaining a loan with a reputable lender. As with any contract it is important to fully read all of the text prior to signing. Reputable payday loan companies prefer to keep different fees to a minimum in order to streamline processes and prevent confusion with customers. Typical “fees” associated with a payday loan usually include:

• Initial Loan Fee – A fee assessed at the time the loan funds are given. This is the company’s fee for providing its services to the consumer.

• “Extension” Fee – A fee assessed when a customer isn’t able to honor the original payoff date and requires an extension of time before the balance is due again. (Most states limit the amount of extensions a customer can request).

• NSF Fee – A fee assessed when an attempt to withdraw funds from a customer’s account is denied due to non-sufficient funds.

4. Payday loans are too complicated.

Respected payday loan companies have a ready and willing Customer Service department available to answer any and all questions a customer might have regarding any aspect of the loan. In addition, creditable payday loan companies have enacted a straightforward and streamlined process for requesting and attaining a loan. All aspects of the process are presented up front and each customer is asked to read and agree to the terms of the loan prior to receiving the funds.

3. Payday loans should only be used as a last resort.

Contrary to what you may have been told in the past, payday loans are actually a cheaper means of immediate funds for people who may have otherwise had to find an alternate, less desirable, and more expensive option. For instance, a payday loan fee is often less expensive than a bank overdraft fee. They are also usually cheaper than a typical credit card “over-the-limit” fee and generally less expensive than the costs associated with restoring a service that would have otherwise been revoked – such as a utilities reconnection or late fee.

2. It is too easy to get behind or miss a payment.

Honorable payday loan companies are very clear about when a payment is due and what will occur if a payment is missed. In addition, they will do what they can (within the limits of the law) to work with customers who cannot honor prior payment obligations. Customers who anticipate an issue regarding paying back the loan on time should contact the company’s Customer Service line to work out arrangements and explore options.

1. Payday Loan companies prey on people who can’t repay their loans.

The vast majority of payday loan customers will pay back their loans on time and never require an extension. Respected companies recognize that an individual is far more likely to pay the debt back in full if the company is ready and willing to work with them. In other words, reputable payday companies would rather work with you to achieve payment in full than take a risk of not receiving any funds at all.

As you can see, the reality behind the payday loan industry is often in stark contrast to the rumors and internet reputations that precede it. For millions of Americans this industry provides a safe, secure, and welcomed alternative when they are faced with a financial crisis. Those same people would likely tell you that this service acted as a lifeline when they needed it most.

Finding a reputable payday loan organization which is dedicated to providing a good customer experience is a route that people should not be afraid of. Often times this service can be exactly what a consumer needs.

Customers should research any organization prior to doing business with them. It is also advisable to make sure that the payday loan company is reputable and that you are working directly with the actual organization and not doing business via a “Lead Site”. Direct payday loan websites generally have a “member log-in” area on their website. A Lead Site often looks like a payday loan company, but instead is actually a site which collects the names of people who have inquired about an online loan. It then “sells” those names to individual payday loan companies for processing. Look for disclaimers which are often located on “Lead Sites” that state they offer referrals to payday loan organizations.

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Foto “Desert Leader” photo credit: Hamed Saber

photo credit: Vincent Boiteau

WHAT CAN I EXPECT FROM THE TYPICAL ONLINE PAYDAY LOAN PROCESS?

The world of online payday loans can be an intimidating and controversial one for consumers. With all of the negative hype and confusing misconceptions circulating, consumers often don’t know whether an online payday loan is the right financial alternative for them and their situation.
The truth is that an online payday loan might just be the answer you’re looking for! At the very least, the option of a payday loan is always something worth looking into, especially if you find yourself in need of immediate financial relief.

This article is intended to clear up some of the confusion and illustrate the typical payday loan process. Obviously, different companies will have different ways of conducting business.
In no way does this article represent the full and exact process for each and every payday loan company that you find online. It is only intended as a general guide for the process and what you can expect from a typical, respectable payday loan company.

Always fully research any company you plan to do business with prior to completing any transactions.

WHERE DO I GO?

First you will need to access the payday loan website. Typically, there are two kinds of payday loan sites on the internet.

1. A Payday Loan Lead Site.

Normally a customer will search for a payday loan site and come across a “Lead Site” thinking it is a payday loan company. “Lead sites” are hosted by companies whose main goal is to gather information from several potential customers, and then sell that information to companies that will further review it and potentially lend you the funds you are requesting. Lead sites are normally identified because they do not have a member log-in section on their homepage. Also look for a disclaimer somewhere on the website which states that their main purpose is to generate name leads for financial loan companies.

2. A Genuine Payday Loan Company Website

You can usually recognize genuine online payday loan sites by searching for a member’s log-in area. These sites are direct lenders for customers who apply for a loan via the company’s website. These companies are responsible for processing the applications in-house and depositing the funds into customer accounts once the loan is approved.

GENERAL REQUIREMENTS:

Customers should always research any company they are planning to do business with. After identifying the company you would like to use you will likely need to fill out a loan application. Online payday loan companies will have their own general pre-designated requirements in place that must be met in order to qualify for a loan. Examples of this may include the following:

1. Active Direct Deposit
2. An established checking and/or savings account that allows unlimited ACH deposits and withdrawals (Established for three months or more as a general rule)
3. A minimum monthly take-home pay amount (Generally around $1000)
4. An established employment history of 3 months or more
5. US citizenship
6. Applicant age of 18 years or older

Online payday loan companies tend to be very specific and forthright about all of the requirements in the loan application. Be sure to fully read and understand all of the terms prior to signing the agreement.

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After you have fully and truthfully answered all of the questions on the application a determination will be made regarding the approval or denial for the loan. Different companies rely on different systems when researching applicants. Reasons for denial may include the following:

• Active “write-offs” or a bad payment history with other payday loan companies
• Non matching information on the application (i.e. – Social security number does not match name given on application)
• Lying on an application
• Applicants, spouses of applicants, or dependants of applicants who are on current active duty with any branch of the military (Federal law prohibits these individuals from doing business with payday loan organizations)
• Excessive loan inquiries with multiple payday loan organization
• Recent poor checking or savings account history
• Excessive amount of current payday loans still outstanding
• False reference or employment contact information

TYPICAL FEES:

Once the loan is approved, the funds will be scheduled to transfer into the customer’s account. The customer will be notified of the date in which the loan will need to be paid in full. In the event that the customer is unable to pay off the payday loan debt on the agreed upon date, “extensions” can be requested. These extensions usually have a fee associated with them. The fee and a full explanation of the extension process should be explained in the original loan agreement. The purpose of an extension is to extend the amount of time before the full loan payment is due again. Customers are generally allotted a specific number of extensions that can be used during the life of a loan. Once this number is reached no further extensions can be requested and the full loan payment amount will be due.
Another fee which may occur, and should also be explained in the original loan agreement, is what is normally referred to as an “NSF Fee”. This fee is charged when attempts to retrieve scheduled payments are made and the customer’s bank rejects the attempted withdrawal due to Non-Sufficient Funds. Typical NSF Fees are around $20.

Note: Customers living in specific states may or may not be able to utilize the extension process, depending on state laws that govern acceptable payday loan processes. Other related state laws may exist and dictate different aspects of the payday loan service. Customers should always research their specific state payday loan laws and regulations before entering into an agreement online.

THE BOTTOM LINE

Online Payday Loans don’t have to be an intimidating or confusing subject. Responsible customers often find them to be the perfect solution for a tough financial situation. The ball is often in the customer’s court when utilizing this option since all of the terms, fees, and guidelines of the payday loan process are readily available prior to accepting any agreement. The key to any successful payday loan transaction is the customer’s grasp in understanding the process and anticipating the way it will play out.

In addition, when doing business with an online payday loan company, customers should also look for an in-house Customer Service Department line. This service can act as a life-line for customers who become confused about any aspect of the process or who may have general questions.

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