Payday Lender Red Flags

- Not all Payday Lenders are Equal -

If you’ve been shopping for a paycheck advance, you probably know about some of the common things to look for in a lender, such as low interest rates and former customers who have had a positive experience. Getting a good interest rate is important, however, there are some payday lender red flags that everyone should be aware of. Most lenders are honest business owners trying to make a living, but there are a few bad apples out there. Predatory lenders exist in almost every industry and they’ll do anything in their power to take advantage of honest customers. Fortunately, these lenders tend to stick out among the crowd. Here’s a look at some common red flags that you should look for in a lender before committing to a loan:

Signs of Bad Payday Lender

Aggressive or pushy behaviour

A common sign of a predatory lender is aggressive behaviour. Bad lenders may make you feel as if you have no choice but to sign up for their loan and often make threats if you are unable to pay it back in time.

No consideration of a borrower’s ability to repay the loan

When filling out an application for a paycheck loan, you should expect to answer some financial questions. Most payday lenders want to know that you make enough money to pay the loan back. Lenders who approve anyone for a loan, regardless of their financial situation, may be trying to take advantage of borrowers by forcing them to take out multiple loans when they can’t pay them back.

Unreasonable loan lengths

Almost all payday lenders use the same length term for their loans – two weeks, which makes sense since most people generally receive their pay checks every other week. However, some lenders may try to force customers into much shorter loan lengths, such as two to three days. These lenders are hoping that you won’t be able to pay in time, so that they can get you to take out another loan for a couple days.

Fees and charges

While paycheck loans generally have higher interest rates compared to normal loans, be mindful of ridiculously high rates or fees. Also, be weary of any lender that wants you to pay loan fees up front. All loan fees or charges should be paid when the loan is due back several weeks later.

Post-dated checks

Some lenders will ask that you leave a post-dated check to pay off the loan on the agreed upon date. This may be a common practice among certain lenders, but it can be a possible red flag. Knowing that many customers will have difficulty paying back their loan, lenders have been known to try and cash the post-dated check, then hit the borrower with bounced check fees when it doesn’t clear.