Online Payday Loans

Online Payday loan

Online payday loans are a new innovation in borrowing money online, especially for the low income groups and those in need of emergency cash. These are short-term loans wherein the borrowers are required to pay back to lenders until the next payday. One of the major advantages of online payday loans is that, it allows low income groups to come up to the standards of financial mainstream. Also referred to as “cash advances” or ‘same day cash loans’ since the cash will be sanctioned on the same day of signing the contract and is a perfect solution for emergency cash. These online payday loans are described as ‘predatory’, feeding on their borrowers and the borrowers are subjected to take more and more payday loans to payback the previous loans. Usually the payday loans are issued at a very high interest and the borrowers. The burden of the interests and the huge amount of loan forces the borrower to apply for the next payday loan, thus leaving the borrower bankrupt.

Depending on the legal maximums of each state, payday loans can range from $100 to $1000.The finance charge is $15 to $30 for a $100 loan. Usually the loan is given for a period of 14 to 21 days. The interest is 400 percent annually (APR).The main demerit is the requirement to pay back the whole amount in full.

Compared to the other loans payday loans are much expensive. The basic requirements for payday loans are a steady income, and personal identification information.
The main demerits are of online payday loans are the following:
1. Extremely expensive loans
2. High finance charges
3. High interests
4. Short repay time
It is estimated that the borrowers take usually twelve to thirteen loans per year and the borrowing cycle goes on and on. The lenders finally emerge as quick moneymakers while the borrowers are left bankrupt.

What if the borrower fails to payback? If it happens the bounced checks will be recorded which may lead to the closure of bank accounts and there will be difficulty in opening new bank accounts. Also some lenders even charge criminal penalties, and may sue the borrower in multiple fronts.

Online pay day loans have risks of frauds as well as security. The borrowers submit the paychecks online by way of fax and the pay back cash is withdrawn from the borrower’s bank account along with the finance charges. Financial crisis has brought the idea of taking payday loans into a different level. More and more small scale businessmen and people in need of urgent money find resort in payday loans, not always knowing about the pitfalls of it and finally unable to payback in time leading to bouncing of checks. This worsens the financial crisis by debts and debts of debts.
One must know that quick cash may be the need of the hour and pay day loans are not the last and only resort. To avoid giving into the pitfalls of payday loans is to:

1. Set some money as hard cash as an emergency fund.
2. Lend money from friends and relatives.
3. Keep a credit card for emergency borrowing.
4. Opt for small loans and repay as soon as you can.

Once you have opted for a payday loan,

1. Avoid payday cycle by not borrowing from payday loan again.
2. Ask the lender if it is permissible to repay in installments,
3. Get some legal help, if necessary. Ask for assistance on how to repay
4. Safeguarded your bank account from penalty cycles while you are on the process of repaying
5. Beware of fraud on the part of lenders, because if your bank account does not have enough money to repay, the money lenders can add extra additional amounts to your paycheck.
6. File a complaint with your banker, in case there have been more than two attempts for collecting the same paycheck.
7. Online payday loans may allow bankers to repay in installments but beware of the chance that your electronic paychecks to bounce off and NSF fees can be charged on the collection of each electronic paycheck.

Online payday loans is more risky than the ones from the payday store because, once the electronic agreement is signed up, the lender, having obtained the personal identification and the security passwords and bank account numbers, gets easy access to the bank account of the borrower to withdraw finance charges and payment. Theft is sure once your financial secrets reach the hands of illegitimate dealers.

Having more than one reasons for not to ‘fall’ for an online payday loan, keep away from it, to safeguard yourself from falling into the ‘debt trap’.