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A list of things you should consider doing in order to protect yourself from common payday lending hazards & mistakes.

When looking for a good company to buy a payday loan or deferred deposit advance, you should keep a few things in mind as you compare different companies. First of all, the lenders that are offering these loans are doing so at sub prime levels. This means that they offer loans to people who may not have the best credit and are at risk for defaulting on their loan. This also means that they pass their risk into the cost of such loans.

If you find a lender that offers low priced payday loans, that lender will normally have a higher requirement for potential applicants and thus, has less risk, and passes those savings onto the customer. This means you should apply to a variety of low priced loans, since you are less likely to be accepted by them. Other lenders may not specify fees because they search through a list of lenders to find the best lender at the best price, and then return the results.

Payday loans are typically given with a higher APR than conventional loans for a few reasons. As mentioned before, the people to which they are offering loans are generally a higher risk population than people to which larger loans like mortgages are offered. Payday loan lenders rarely look at the total indebtedness of potential clients and may only want proof of employment and a checking account. These things make it much easier to get a payday loan, and if you are not careful, it makes it much easier to find yourself further in debt.

Payday lenders often also use third-party lenders to service their loans. This means that when you give a lender your personal information, they might forward this information to various companies who will check you eligibility for a loan and relay this information back to the company to which you gave your information. This is especially true on the internet. The important thing to look for is that the site you are dealing with has a secure connection and that the connection remains secure as you go through the loan process. You can verify this in internet explorer by looking in the lower right corner to see if there is a small icon of a lock. This indicated a secure connection. Also, look for a site that you feel you can trust. Your own judgment is the best indicator of a reputable company.

There are also several laws in place to keep you safe when using payday loans. The Fair Credit Reporting Act stated that a lender must tell you why you have been denied credit if they use a consumer reporting agency. The Equal Opportunity Act mandated that payday loan lenders can not discriminate against applicants. The biggest safe guard is the Federal Trade Commission act which declares that unfair or deceptive trade practices are illegal. If you feel you’re rights have been violated, take action.

First and foremost, do not use a company again if you feel they have mistreated you in the past. There are enough payday loan lenders in the market to give any consumer plenty of choice. Try a search engine query for exactly what you are looking for, “payday loan.” Furthermore, you can contact the FTC.gov website to report any unlawful practices. You should also file a report with the Better Business Bureau.

The best defense you have against a bad payday loan experience is to keep yourself well informed. Ask questions and make sure you are comfortable with the transaction before you have committed yourself. There are a lot of really good lenders in the market. Search until you find one that you can feel secure with and that offers top notch service.

References:
http://www.fdic.gov/news/news/financial/2005/fil1405a.html
http://www.usa.gov/