Advantages and Disadvantages of Various Payday Loan Perks

Posted by on Aug 14, 2006 in Tips

Advantages and Disadvantages of Various Payday Loan Perks

Payday lenders offer a variety of perks to make borrowing money faster, easier or cheaper.

Unfortunately, one man’s perk is another man’s poison.

Let’s examine the advantages and disadvantages of various payday loan perks…

Faxless (No Fax)

Advantages:

  • convenience (no need for a fax machine)

Disadvantages:

  • price (tend to be more expensive)
  • speed (tend to be slower)
  • privacy risks (more information must be sent online)
  • less discrete (lender will contact employer)

Faxless payday lenders must verify all your information by electronic means (telephone, internet, etc.). This takes time and costs money. Also, if you choose faxless, you will have to send more information online. This increases the risk of information being intercepted and leaked to third parties. Finally, lenders may phone your employer to verify employment and, if the lender is not discrete, your employer may find out you are taking out a payday loan.

First Loan Free

Advantages:

  • price (interest free loan)

Disadvantages:

  • high default fees (if you don’t repay loan on time)
  • limited offer (one time per person)

First loan free is an attractive perk for borrowers able to repay the loan on their next payday. As sweet as interest-free cash may taste, however, your next hit will come at a high price. Try not to get hooked on consumer loans. Also, be sure to repay the loan on time. The fee for defaulting tends to be higher. First loan free is not a charity – lenders make most profit on borrowers who don’t repay loans as video rental shops make most profit on late fees.

Same Day

Advantages:

  • speed (quick cash transfer)

Disadvantages:

  • price (tend to be more expensive)
  • requirements (tend to have stricter requirements)
  • application (will require detailed, complete information)

For those in urgent need of cash, same day loans offer speed but tend to be more expensive and have stricter requirements. More information will be required from lenders and, if the application is not complete, your chances of getting the cash on the same day will be slim.

Toll Free Phone

Advantages:

  • ability to make inquiries (clarify information on website)
  • trust (more trustworthy than site without phone number)

Disadvantages:

  • none

Toll free phone numbers are convenient and let you contact the company behind the websites. Actual lenders will always post their phone number and address. Websites without detailed contact information should never be trusted. They may be publishers/affiliates or identity thieves looking to profit from your personal information. Of course, a toll-free phone number should never be used as the only criteria to establish trust. Some publishers/affiliates use shared toll-free numbers.

No Direct Deposit

Advantages:

  • convenience (no need for ‘direct deposit’ paychecks)

Disadvantages:

  • price (tend to be more expensive)

Lenders like direct deposit because it increases the chances that they will be paid. If the chances that they are not paid increase, the lender’s prices must also increase to cover the cost of defaulted loans.

No Bank Statement

Advantages:

  • convenience (no need for a bank statement)
  • privacy (does not reveal your financial status)

Disadvantages:

  • price (tend to be more expensive)

No bank statement payday loans let you keep NSF entries private. This increases the lender’s risk so they must charge higher fees to cover loans that are never repaid.

No Employment Verification

Advantages:

  • privacy (does not reveal financial status to employer)

Disadvantages:

  • price (tend to be more expensive)

No employment verification payday loans are more discreet because your employer is never contacted. This discretion comes at a price. Lenders must charge more to cover losses to scam artists who pose as legitimate employees to borrow money they have no intention of repaying.

No Credit Check

Advantages:

  • helps people with no credit (widows, divorcees and immigrants)

Disadvantages:

  • price (tend to be more expensive)

This oft-touted ‘perk’ is not really a perk at all. It is the raison d’etre of payday loans – they exist to offer cash loans to people who have poor credit. If a person had good credit, they would not be shopping for an expensive payday loan in the first place. Another reason credit is not important to payday lenders is that your employment (paycheck) is the security for the loan so credit is immaterial. Since payday lenders have to cover the cost of defaulted loans, prices will be much higher than loans that require a credit check.

Most perks come with a price.

Beware lenders who offer numerous perks at low prices.

If it sounds too good to be true, it is.

Usually, websites offering too many perks at unusually low prices are not lenders at all. They are identity thieves or data collectors looking to harvest your personal information.

Borrower beware!

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