Escape the Payday Predator (1 of 3): Identify a Predatory Lender with these 5 Warning Signs

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Payday loans are never safe. Here are 5 warning signs that you’re dealing with a predatory lender.

You’ve probably heard of payday lenders or seen their storefronts or websites before. They promise quick cash in the form of a payday loan. Payday loans are small-dollar, short-term, unsecured loans. Sometimes referred to as cash advances or payday advances, these loans carry high interest and short repayment terms, often making repayment difficult for borrowers. They’re designed to entrap borrowers and steal from those most in need. Bottom line: They’re never safe.

Here are five warning signs you can use to quickly identify a predatory payday loan or lender.

Warning sign 1: They don’t care who you are

They’ll make it easy for you. Too easy.

Walk into one of these stores with a post-dated check for the amount you need plus whatever fees and interest they dictate, some proof of income, and your state ID, and walk out with cash. This easy access is one of many reasons these loans can be dangerous. Payday lenders don’t care if you can repay on time because they don’t want you to repay on time (more on that later). They’ll take anyone and everyone they can. If your lender doesn’t turn anyone away, they may be a predator.

Warning sign 2: It’s right there in the name

Payday loans have a bad reputation, and deservedly so. While many predatory lenders call their loans “Payday Loans”, others have moved on to using other terms like payday and cash advances (some even disguise themselves as short-term “mortgage companies”). Whatever they want to call themselves, they are predatory lenders.

If your lender is offering you a payday loan or a small dollar, short term loan under another name (“cash advance”), you may be dealing with a predator (read more in The Truth about Payday Loans: An interview with financial expert Ann Logue).

Warning sign 3: Short terms, high risk

Short terms are the benchmark warning signs for any payday loan. Terms are usually fourteen days, the standard length of time of most folks’ pay period. Remember that post-dated check you wrote to receive your payday loan? If you fail to repay the lender by the time your next payday rolls around, they’ll go ahead and cash that check. But will you have the money by then? Most borrowers won’t.1

The short terms associated with payday loans increase the risk you’re taking on as a borrower. Sure, you might be able to repay what you borrowed plus additional fees and interest, but most borrowers are not able to pay it off on time. Short terms may make it feel like you’re getting a quick loan, but you’re actually being walked into long-term debt.

Warning sign 4: Sky-high APR

On average, a payday lender will charge you between $10 and $30 for every $100 you borrow. If you’re taking out a $400 loan, you’ll be paying roughly $80 to borrow that money for just two weeks. Now imagine that same loan extended over a period of five months, which is the average length of time borrowers end up trapped with one of these loans.

With the average payday lender charging between 400-1,200% annual percentage rate (APR), that $80 in interest could become $1,600 or more. Terrifying.

Warning sign 5: They want you to “roll over”

So you took out a payday loan, and your repayment is due but you don’t have the money. Now what? The lender may offer to “rollover” your loan—essentially extending it for another two weeks. That sounds pretty good until they mention that your newly extended loan will come with another round of interest fees. Yikes.

Now the debt trap is sprung. The combination of the short term and high interest has put you in a position to rollover your debt, forcing you to owe more than what you already couldn’t afford in the first place. That’s why these guys are predators.

These warning signs will help you if you’re unsure about whether or not you’re dealing with a payday lender, either online or in a store. Once you’re sure they are offering payday loans, consider using an alternative source to access the funds you need. OppLoans offers safe personal installment loans with longer terms, higher loan amounts, and APRs as much as 125% lower than payday lenders. Your payments are fixed with OppLoans, so you’ll always know what your monthly payment will be. You can be approved today and receive money in your bank account as soon as the next business day. Click below to get started today.

1. “Payday Lending in America: Who Borrows, Where They Borrow, and Why” (July 2012). The Pew Charitable Trusts. Accessed April 25, 2016. href=””

Blog Series: Escape the Payday Predator
Part 1: Identify a Predatory Lender with these 5 Warning Signs
Part 2: Three Common Tactics Meant to Trap You in Debt
Part 3: Fact-Checking the Payday Lenders

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