For the past few years the popularity of payday loans has
grown rapidly and now the process has evolved to the point
where the entire process of submitting your application,
receiving approval and receiving the money can be completed on
the Internet.
Online
payday loans require the same information as the
traditional ones but the process is entirely electronic.
Because a person must submit sensitive financial and
personal information over the web to receive an online payday
loan, many consumer groups are warning people about the
dangers of sending information through unsecured websites. In
addition to the shock of your identity being stolen by a
malicious hacker, identity theft can cause financial and legal
problems that may be difficult to imagine and even more
difficult to resolve.
But there is also financial danger with online payday
loans because of the high interest rates that you are charged
to access this credit. For example, the interest rate
for a $500 loan is 26% or $150. Most must be repaid by the
next pay period. And instead of a
post-dated
check being held as the security for the payday loan, the
money is electronically debited from your bank account.
Many people who receive their payday loans and are unable
to repay it within the period of time required are given
extensions to repay the loan. The longer you take to
repay the loan, the more interest you will pay. At an
interest rate of 26%, over 12 months the annual percentage
rate can easily exceed 650% or $3250.
Plus, you should know that even though a credit report is
not required to receive a loan, if you fail to repay it at the
scheduled time, the credit reporting agencies are notified and
a negative mark is placed on your credit report.
Submitting your personal information such as your date of
birth and Social Security number along with your banking
information opens the door to unscrupulous merchants to take
advantage of you financially and legally through the access to
your personal information and your checking account.
Currently online payday loans are being advertised
through direct e-mail marketing, group forum discussion boards
and through referral programs. In many cases the website
may include a legal disclaimer that prevents you from taking
legal action if you encounter a problem after receiving the
money. In this disclaimer at the states that the website
operator is not the land they are merely the middleman
transfers your application to the lender is provide the
money.
Online payday loans appeal to consumers who want fast,
easy access to
instant
cash loans. But unless you carefully read the fine
print of the loan agreement and check the security of the
website you could be headed fast for financial problems that
can sink you further in debt and turn your life into a legal
nightmare with identity theft as merely the tip of the
iceberg.