Scouring the web for a reputable payday loan company can be a stressful and time-consuming process. How do you truly know if a company is a legitimate payday lender? How can you be sure your financial information is safe and secure?
It’s important to distinguish between reputable payday lenders and those that are looking to sell your personal information or trap you in a cycle of debt. Here are three types of businesses that you may encounter in your online search for payday loans:
Licensed Direct Lenders: This is your best, safest option. Licensed direct lenders are subject to all financial laws and regulations that protect consumers, and they don’t sell your personal information. Most licensed direct lenders also offer customer service, so you have someone to contact if you have questions. LendUp is proud to be a licensed direct lender.
Lead Generators: These companies advertise payday loans, but do not lend money themselves. Instead, they gather consumer information from their loan application form, and sell it to the highest-bidding lender. Lead generators aren’t necessarily obligated to keep your personal information safe or private, so it could end up in anyone’s hands. This is why many online payday loan borrowers complain of unsolicited calls and emails from unfamiliar sources. You can recognize these companies by their offer to “match” you with lenders.
Offshore and Tribal Lenders: Many lenders avoid regulatory scrutiny by incorporating outside state and/or federal law. This allows them to charge much higher interest and fees than would otherwise be allowed by state or federal laws, and just as importantly, the customer loses any rights and protections offered by our government. These companies can be tricky to recognize, but one way is to look for posted state licenses (or lack thereof) on their website.
It can be difficult to select a short-term lender when there are so many to choose from, but hopefully these guidelines will help you make the right choice.