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There is a warning issued by the Consumer Federation of America (CFA) about being cautious while applying for payday loans from the Internet. Figures show that when the loan is due to be paid, it can cost somewhere between $30 to $100 as the nominal charge and the APR, or the annual percentage rate, can go up to 650 percent. There was a survey done by the CFA of 100 Internet payday loan sites that showed that most of these sites involved wiring of small payday loans to the consumers. This is a very dangerous trend, as the transactions made through the Internet can be a way to spread your personal information.
It is very important to make safe transactions, and they may not be so in the case of online transactions. One has to make sure that the web site you are taking the online payday loan from should be reliable.
It is said that the Internet payday loans can burn a hole in the pockets of the borrower. If you take a payday loan for $500, they cost about $150 more to the customer. In this case again, a balance of $650 will be charged from the borrower’s checking account.
Many lenders renew the payday loans by electronically drawing finance charges from the customer's checking account on every payday. If the customer does not have enough money deposited in the account, to cover the repayment, the payday lender and the bank are entitled to impose funds fees.
There are many ways in which the online payday loans are marketed. The marketing is done through e-mails, paid ads, online search and referrals. Generally, a consumer fills an online application or faxes an application with personal information, Social Security Numbers, bank employer’s number and the employer information. The customer also needs to fax copies of a recent bank statement, a check and signed paperwork. The payday loan is directly deposited in the customer’s account and the payday loan payment is electronically drawn from the borrower’s account on the next payday.
The contracts offered by Internet payday loan providers include lots of one-sided terms and conditions to which a loan seeker has to agree. Some of these terms are mandatory arbitration clauses, agreements that the loan seeker will not participate in class action lawsuits, and not file for bankruptcy. Some of these lenders even lay down a condition that the applicants will have to keep their bank accounts operational until loans are paid back. And though wage assignments are illegal in several states, many of the lenders ask for ¨voluntary¨ wage assignments.
CFA advises consumers seeking loans that they should not take a loan by issuing a post-dated check or electronic access to their bank account as security. Payday loans are very much expensive and can be seldom paid back on the next payday. CFA also advises all the people that they shouldn't give out their bank account numbers, social security numbers or other personal financial information over the Internet or fax to unknown companies. Rather, they should look out for lower cost credit, and compare both the dollar finance charge and the APR to get the lowest cost credit available. For any type of assistance help with financial problems, CFA advises the consumers to go for credit counseling or legal assistance.
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