When needing some fast money to help out with bills or emergency costs, many people choose online payday loans as a quick solution to their money problem. When used appropriately, these types of short-term loans work well to help protect the customer’s budgeted expenses. These loans are infamous for their fees and high annual interest rates. States which allow these lending practices are have regulated the amounts on fees, interest rates and the capped the loan amount as well. The states believe that with these practices in place, the customer will be better protected from predatory lenders. Finding trusted source for money may take some legwork, but there are responsible online payday loans lenders out there.
Many people have a trusted relationship with their bank. A financial institution which is backed by the Federal Reserve seems to be a place to be trusted. Banks are well known for their selective loan process and many Americans would not qualify for one reason or another. So what does this have to do with the online payday loans industry? The answer is simple, many banks have created their own version of a payday loan. However, this version does not have to comply with state regulations and the fees and interest collected from a “trusted loan source” are bringing in lots of revenue.
The loan program is basically the same. Apply for a short-term loan. The bank will directly deposit the money into your checking account. Once your next paycheck is directly deposited, the bank will withdraw your loan amount plus the fees. Sounds simple, right? Unfortunately, the same problems occur with bank short-term loans as do with online payday loans lenders. Most people will run into the same budget problems with the lack of cash once the debit is made. This interprets into the need to take out another loan in order to cover the monthly bills. Trying to escape the bank loan will put your bank account in jeopardy. In the bank’s payday lending disclosure, the fine print, the consumer is warned about overdraft fees, having negative reports sent to the credit bureaus and account closures if the direct deposits do not come into the account as scheduled.
The online payday loans procedure for insufficient funds will be to charge an additional fee, with no threats against your bank account. There is a whole different lending and collecting approach which keeps the responsible lending company a better option than a bank payday loan.
Banks are taking advantage of a built in general trust that people have and distrust for online lenders. Bad publicity are driving customers from some great companies and sending them into a bank which can cause more harm than good when loan terms are defaulted upon. Do your homework when looking for online payday loans. Read the fine print and ask all your questions before signing for your loan. You may not go into your loan expecting to default on it, but understanding the consequences just in case is good preparation to protect for your future funds.