5 Questions to Ask When Choosing a Lender

When you’re looking for a payday loan, you may think you don’t have time to comparison shop. You can’t afford to make that mistake because you could end up paying a price if you choose an unscrupulous lender. 

Here are some questions you need to ask to make sure you choose a lender who will treat you fairly, follow the law and offer you a safe, secure and worry-free payday loan. 

1. Is the lender state-licensed?

Payday loans from state-licensed lenders are highly regulated, contrary to what some media reports suggest. In the U.S., payday loans are legal in many states

Depending upon the state in which you’re located, state laws dictate how much cash you can borrow, how much lenders can charge you, and the amount of time you can take to pay back a payday loan. Some states even have statewide databases that track consumers by their social security numbers to make sure they don’t take more than one loan at a time. 

If lenders don’t comply with state law, they are subject to penalties and fines. Regulation by state authorities ensures that borrowers are not exploited. If a lender has a state license, you can be sure that the lender’s practices are fair, responsible, and ethical. Legitimate companies will prominently display their licenses. 

Lending Bear, a state-licensed provider of online payday loans, displays its licenses on the rates and terms page of its website. 

2. Is the lender authorized to do business in your state?

In the past, retail storefront locations were the places to go to get a payday loan. Today, more and more consumers are looking for payday loans online. On the internet, there are many unlicensed lenders operating from offshore locations. 

They use their location to get around state regulations. It is very important to determine whether the payday lender is authorized to do business in the state where you live. 

3. Is the lender a direct lender or a lead generator?

Not all companies that advertise payday loans actually loan you the money. They sell the data you provide on your loan application to lenders. These lead generating companies often bury the fact that they will not be the ones supplying the loan in the fine print on their websites. 

Make sure you choose a direct lender who won’t sell your information to the highest bidder but will work directly with you. 

4. Is the lender a CFSA member?

The Community Financial Services Association (CFSA) is a leading trade group of state-licensed small-dollar lenders. It ensures that members follow best practices, thus offering protection to consumers. Truthful advertising, complying with federal and state law, and keeping customer information private are some of these best practices. 

5. Does the lender give you the information you need?

Those who criticize payday lenders often focus on fraudulent companies who take advantage of hapless victims. However, reputable lenders are strictly regulated and are required to be transparent in their advertising and delivery of payday loans. 

You need to choose a lender who keeps you well-informed at every stage of the application process and is transparent about all the terms and conditions of your loan. 

When you are fully informed about factors such as repayment, fees and interest, a payday loan can help you when you face that urgent need to deal with an unplanned financial problem. 

Responsible lenders will take your monthly income into account and stick to the principle of not allowing you to get a larger amount of money than you are realistically able to pay back. 

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