Abusive Debt Collection Practices
Abusive debt collection practices are a potential pitfall if you don’t deal with ethical, state licensed payday lenders and fail to pay your debt in a timely manner.
Unethical lenders may threaten you, harass you, reveal your debt to third parties, try to get you fired or file civil suit against you in small claims court…
Updated: September 27, 2011.
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Pitfalls When You Stop Payment on a Payday Loan Check
Before you consider stopping payment on a payday loan check, think very carefully.
In most cases, contacting your lender and working out a payment plan is the best move for all parties involved. Some states even have payment plan guidelines and limits on how much the lender can charge you to “roll over” or extend the loan.
Stopping payment on checks will incur expensive fees. If the lender sends your account to collections, it will harm your credit rating. Depending on your state, stopping payment may even be illegal…
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Faxless Payday Loan Pitfalls
Faxless payday loans are convenient for people who do not have access to a fax machine.
This convenience comes at a price.
‘No fax’ cash advance loans tend to be slower, more indiscrete and may expose your personal information…
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No Partial Payment
If you have an outstanding balance on your credit card, paying off half the principle will reduce monthly interest fees significantly.
If you have an outstanding payday loan, on the other hand, it is all or nothing.
Many online payday lenders do not accept partial payment.
Although this might not seem like much, no partial payment is a dangerous pitfall of payday loans…
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Personal Information Risks
Online payday loans put your personal information at risk.
Internet lenders do not have physical access to your identification and other documents so they need to ask for a lot of personal information – much more than they would need if you were applying in person.
Sometimes, this leads to privacy invasions and personal information abuse…
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Personal Check Pitfalls
Many payday loan transactions are based on personal checks.
Borrowers write a personal check to lender for amount borrowed plus fees and receive cash. Lenders hold the check until next payday. At that point, borrowers can:
- pay the finance charge to extend the loan (roll over or flip the loan)
- pay the full amount in cash to redeem the check
- allow lender to deposit check at bank
Sounds easy enough. If you are not careful, though, you could face stiff penalties, lose your checking account or even face a lawsuit…
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Unwanted Commercial Messages
Unwanted commercial messages are one side-effect of using unethical payday loan sites.
After signing up for a payday loan, some people experience a sudden increase in unsolicited bulk e-mail (UBE or ‘spam’) and tele-marketing calls.
Not surprisingly, many of these messages are about debt consolidation, credit cards and other financial services.
There are, however, a few things you can do to minimize the risk…
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Credit Rating
Payday loans do not help your credit rating.
Paying them back on time does nothing for your FICO (Fair Isaac Company) score.
If you fail to pay them back, however, payday loans can harm your credit rating…
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Signing Away Legal Protections
When you sign for a payday loan, you sign away significant legal protections.
Many payday loan contracts include clauses that try to keep you from filing a lawsuit in a court of law…
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Debt Treadmill
The most dangerous pitfall of payday loans is the Debt Treadmill.
The debt treadmill is when you have only enough income to pay off the interest on your loan but not the principle.
How does one get on the debt treadmill? Let’s do the math…
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