Payday loans meet a very specific need to a very specific subset of the population. People who can’t get credit via other means find themselves visiting the payday lender. They go there to get high-interest, short-term loans to meet temporary needs. In and of itself, this isn’t illegal. Many states place certain regulations on payday lenders, of course, but the basic concept isn’t illegal in itself.
The problem comes with some payday lenders who are operating outside of the law. Some lenders bend the law, and some outright break it. If you’re going to keep from being taken advantage of, you need to check out your lender before you sign for the loan.
Here are some things you can do to make sure your lender is legitimate:
Verify the lender’s right to legally operate. If you’re going into a brick and mortar payday loan store, you can ask to see their state licenses. Every state has different regulations for lenders, but all require some sort of licensing.
Read all of the documentation. No, it’s not likely that you’re going to understand every line in a payday loan contract. You can ask to take the contract and have an attorney look at it, but most of the time if you need a payday loan you probably don’t have money to hire an attorney. So, go through the contract and ask about anything that’s unclear.
Check consumer reviews. A simple look at your local Better Business Bureau page can often tell you about how the company conducts business. You might also be able to find information about the company by searching through local news media websites to see if there have been stories looking at the lender.
Be careful when borrowing online. There are online payday loan lenders. Not all of these lenders are able to operate in every state, however. Before you make any transaction online, verify that the business is legitimate.
Don’t be afraid to wait. Obviously, if you need a payday loan, you’re under some time pressure. Still, sometimes waiting just a single day will present other opportunities. At the very least, it will give you some time to research the lender and make sure they’re legitimate.