Payday Loans Online
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Do you have $500 or more in savings?
If you do, then give yourself a pat on the back, because almost six in every ten Americans don’t.1 And that can be a big problem, especially when life throws an unexpected expense your way.
Let’s say your car suddenly breaks down on the way to work, or a storm throws a tree branch through your front window, or some unpaid parking tickets lead to your car getting booted. What would you do?
Lots of everyday problems can pop up out of nowhere and leave you in a bind. For many of these situations, the simple solution is money… Money to pay for a tow to a mechanic’s shop, money for a home repair, or money for unpaid bills.
But if you’re like the 60 percent of Americans who have less than $500 in savings, then the money to solve those kinds of problem is something you just don’t have.
In a perfect world, you could rely on a credit card to cover emergency expenses. But, as you might have already guessed, most Americans don’t have that kind of available credit on hand to use either. In fact, according to a Harvard University study, nearly 40 percent of households making less than $40,000 a year have no credit cards at all.2 And one in ten Americans have no credit score whatsoever!3
So, if you have little to no savings and no available credit, what can you do when a financial emergency strikes?
It may feel like you have no options. You may feel totally trapped.
The good news is you’re not! There are safe financial solutions (like installment loans) available to you.
But the bad news is that when you’re in a tough financial spot, you’ll find yourself targeted by predatory lenders offering fast cash loans that are actually dangerous debt traps. These loans are designed to deceive you and can ultimately leave you worse off financially than you are now.
You’ve certainly seen these lenders out there. Think of the strip mall storefronts with their neon signs and bright banners advertising “FAST CASH NOW” and “NEED CASH? INSTANT APPROVAL!” These are the payday lenders and they are everywhere. In fact, there are four times as many payday lending stores in America as there are McDonald’s restaurants.4
So, what is a payday loan exactly? And is it safe? (Spoiler alert: No. They’re not safe at all.)
What are Payday Loans?
A payday loan is a short-term, high interest, fast cash loan marketed as a way to borrow money ASAP. You’re supposed to repay it by the time you get your next paycheck (hence the name “payday loan”).
In theory, it’s the kind of loan you’d take out when your car gets that flat tire or your kid’s asthma prescription needs to be filled. But in reality, it’s a much different (and more dangerous) story.
How do Payday Loans work?
Your basic payday loan works like this:
You need $500 to fund a sudden car repair. So you go to a payday loan store or online payday lender.
You walk out with $500 cash. And the next time you receive your paycheck from work (usually within two weeks), the payday lender will simply cash your check and… ta da! Your loan is repaid. Sounds simple, right?
Unfortunately, it’s never that simple. Here’s why:
Now, when you’re in an emergency and you think you have no other options, paying $15 for every $100 you borrow might not sound that bad. And that’s what payday lenders are counting on. But you’ll only have two weeks (or less) to pay the lender back $575 plus any additional finance charges or processing fees they choose to add on.
If you’re a low-income individual, an amount of money like that can be impossible to repay in such a short amount of time.
And even if you can repay it, that repayment will take a huge bite out of your next paycheck. If you count on that paycheck for rent, groceries, and other daily expenses (and who doesn’t?), then paying back your payday loan will leave you right back where your started: running low on money until your next payday! That could mean no money for gas to get to work, no money for groceries, maybe even no money for rent—sounds pretty bad, right?
So what do you do?
Online Payday Loans
Payday Loans are never safe. But the good news is that regulators, the media and the general public are catching on to the dangers of these risky financial products. A quick search for payday loan news will paint the picture that regulations are increasing, consumers are becoming more aware and the general concept of payday loans are being viewed with increasing suspicion, but the news isn’t all good.
Even though more and more states are curtailing or even banning payday loans, many payday lenders are migrating to a more hospital environment, where misinformation can sometimes be even more concentrated. We’re talking, of course, about the Internet.
Online Payday Loans are fast cash loans that function much like a conventional payday loan or “cash advance.” The typical difference is that the entire transaction happens online, rather than in a brick-and-mortar shop.
Borrowers may feel like they’re only a few clicks away from fast cash when they need money now; but the truth is, online payday loans only make it much easier for the payday loan provider to trap borrowers in the same cycle of payday loan debt.
How do Online Payday Loans work?
Online payday loan providers count on you coming to them. They depend on financially distressed individuals to open up a web-browser and simply typing in what they’re thinking:
- “I need money now”
- “Online payday loan”
- “How to get cash now”
Web searches like these will typically lead you to any number of online payday loan providers, or even a middleman called a Loan Aggregator (a site that collects your information and literally sells your search for short-term loan to online payday loan firms).
Because the entire payday loan transaction happens over the internet, you’ll be asked to submit materials like your paystub and bank account information to the lender. There are many legitimate installment loan providers who must make similar requests in order to be able to fund you, but with online payday loan firms and websites, there are a number of red flags to watch out for.
Are Online Payday Loans safe?
No! Payday Loans are never safe and their digital counterpart online payday loans are just as dangerous. Payday Loans, in any form, should always be avoided. They’re debt traps by design; meaning the toxic combination of high interest and short repayment terms mean the loan is difficult—or even impossible—to repay. This traps borrowers in a repeating cycle of rollover.
Wondering if you’re dealing with an online payday loan firm? Look for these warning signs:
- Short terms. Typically only two weeks.
- Sky-high APRs. The average payday loan APR is an unconscionable 400%
- Rollover. What happens when you can’t pay? If they want to offer you a rollover, then you should roll away from the table.
Are Online Payday Loans legal?
Like other loan products, the legality of online payday loans is determined by the state. For instance, Arizona, North Carolina, Arkansas and others have outlawed payday loans. Other states have not.
Online Payday Loans may or may not be legal depending on where you live. For information about Payday Loans and Subprime Lending in your city or state, check out our Subprime Reports.
Should I get an Online Payday Loan?
Online Payday Loans are as dangerous as traditional payday loans. Never borrow a payday loan and always seek out responsible alternatives.
Payday Loan rollover risk
Well, your payday lender will offer you a “solution” called “rollover.” The only issue is that this solution is actually designed to cause you even more financial problems.
When you can’t afford to repay your payday loan (and many people can’t—twenty percent of borrowers default7) the payday lender will offer you an opportunity to “roll” your loan over. This means you pay only the interest owed and extend the term of the loan for another two weeks, at the cost of even more interest and another round of fees.
Rolling over a loan increases the cost of your loan, but it does not reduce the principal amount that you owe. It’s a total trap!
So back to our $500 example. If you decide to rollover your loan, you pay the lender $75 dollars now and you have another two weeks to pay back the $500 that you owe.
Your income isn’t likely to go up in the meantime, so you’ll have just as hard a time paying back the principal when you roll it over. In fact, it will even make it harder.
If you were to rollover $75 in fees three times before you finally pay it back, you will have essentially paid $225 to borrow $500.8
Rollover is the most dangerous feature of the payday loan debt trap and it ensnares the majority of payday loan customers. In fact, a Consumer Financial Protection Bureau (CFPB) study found that 80 percent of payday loan customers rolled over or reborrowed their loans within 30 days.9
The average payday loan customer is in debt for nearly 200 days of the year. And this is in addition to their regular bills and any credit card debt.10
The payday loan is really nothing more than a debt trap by design. It’s a hazardous financial snare meant to squeeze money out of those who need it most.
Who are the Payday Loan borrowers?
If you’re financially vulnerable, you’ll be targeted by payday lenders. Payday lenders go for the low-income, the elderly, minorities and others who may be disproportionately financially insecure.
According to the Pew Charitable Trusts:
- 12 million Americans use payday loans every year
- 52 percent of payday loan borrowers are women
- 12 percent of African Americans have borrowed a payday loan
- 13 percent of separated or divorced Americans have borrowed a payday loan
- Payday loan borrowers are more likely to live in urban communities, the South, and the Midwest.11
Many other studies have found that there are extremely high concentrations of payday loan stores in areas that have large Black or African-American and Hispanic populations.12
What can you do if you’re trapped in a Payday Loan?
Our goal is to help you avoid a payday loan. They’re dangerous for your personal finances and destructive to communities.
But if you are already trapped in a payday loan, there are a number of actions you can take that can begin to help improve your situation right away.
If you’re struggling to escape payday lending, you can consider…
- Speaking with an accredited credit counselor who may be able to help restructure your debt.
- Some payday lenders offer an extended payment plan that won’t raise your interest—but you’ll have to ask for it!13
- Consolidate payday loan debt with a loan that offers lower interest rates.
And of course, if you simply need to borrow money, know that you definitely have better options than a payday loan.
What are the alternatives to Payday Loans?
There are much safer alternatives to a predatory payday loan. These include personal loans from banks and credit unions. But if you have bad credit and are finding yourself shut out from traditional lending, consider a personal installment loan from a modern personal lender.
There are many ways to vet the safety of a lender. Some of these ways include:
- Look for the lender’s customers reviews. See what borrowers have to say about their experience working with the company on sites like Google, Facebook and LendingTree. And make sure you check out the lender’s page on the Better Business Bureau to see if they’re accredited (and what kind of grade they’ve received).
- Read all of your loan agreement. And make sure to ask questions too. Don’t just look at the interest rate for your loan, also look at the APR—this will include any additional fees that you’re being charged and will give you a better idea of how much the loan actually costs in comparison to other loans. If the lender cannot answer the questions that you’re asking them, then they are NOT a lender you should be working with!
- Compare offers from multiple lenders. Even if you have to get the money in a hurry, take some extra time and see which lender in your area or online is the most reliable and/or can offer you the best deal. Finding the loan that works best for you is important. You might even want to compare some lenders now before you’re hit with an emergency expense. That way, you can act quickly when you need to while staying confident that you’re getting the best deal available.
If you want to avoid taking out a predatory payday loan, then the best thing you can do is look at taking out a long-term installment loan. There are lenders out there who will lend to folks with bad credit but whose products come with larger principals, lower rates and more reasonable payments.
The main advantage of an installment loan is that you do not have to pay the loan back all at once. Instead of a two-week term, installment loans are designed to be repaid in regularly scheduled payments over a series of months. This way, you can pay the loan off a little bit at a time and escape the rollover debt trap.
Many installment loans also come with lower APRs than payday loans. And they also offer amortizing payment structures, which means that every payment you make goes toward paying down the principal and the interest.
If you are one of the six in ten Americans who has less than $500 in savings, then you need a plan for dealing with unforeseen expenses.
But if that plan involves taking out a predatory payday loan, then you’re on the wrong track! With interest rates around 400 percent, full repayment due after only a few weeks, and dangerous loan rollover, payday loans are a great way to get deeper into debt—pretty much the opposite of what a good loan is supposed to do.
If you need money and you need it fast, consider taking out a personal installment loan from OppLoans instead. With lower rates, longer terms, and more reasonable payments, we offer loans that are designed to work for you. That’s why our customers love us. (Check out our reviews on Google and Facebook!)
After all, you deserve better than a payday loan.
- Vasel, Kathryn. “6 in 10 Americans don’t have $500 in savings.” Money.CNN.com. Accessed March 23, 2017 from http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings/.
- Gonzalez, Jamie and Holmes, Tamara. “Credit card debt statistics.” CreditCards.com. Accessed on March 23, 2017 from http://www.creditcards.com/credit-card-news/credit-card-debt-statistics-1276.php.
- Holland, Kelley. “45 million Americans are living without a credit score.” CNBC.com. Accessed March 23, 2017 from http://www.cnbc.com/2015/05/05/credit-invisible-26-million-have-no-credit-score.html.
- Alpert, Bruce. “Barack Obama: Payday loan stores now more prevalent than McDonald’s and often ‘trap people in cycle of debt’.” Nola.com. Accessed March 23, 2017 from http://www.nola.com/politics/index.ssf/2015/03/obama_administration_proposing.html.
- “What is a payday loan?” ConsumerFinance.gov. Accessed March 24, 2017 from https://www.consumerfinance.gov/askcfpb/1567/what-payday-loan.html.
- Dilworth, Kelly. “Average credit card interest rates rise to 15.07%.” CreditCards.com. Accessed on March 24, 2017 from http://www.creditcards.com/credit-card-news/interest-rate-report-100114-up-2121.php.
- “How Payday Loans Work.” PaydayLoanInfo.org. Accessed on March 24, 2017 from http://www.paydayloaninfo.org/facts.
- “What does it mean to renew or roll over a payday loan?” ConsumerFinance.gov. Accessed on March 24, 2017 from https://www.consumerfinance.gov/askcfpb/1573/what-does-it-mean-renew-or-roll-over-payday-loan.html
- Burke, Kathleen. “CFPB Data Point: Payday Lending.” ConsumerFinance.gov. Accessed on March 24, 2017 from http://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf.
- Morran, Chris. “The Average payday Loan Borrower Spends More Than Half The Year In Debt To Lender.” Cosumerist.com. Accessed on March 24, 2017 from https://consumerist.com/2013/04/26/the-average-payday-loan-borrower-spends-more-than-half-the-year-in-debt-to-lender/.
- “Payday Lending in America: Who Borrows, Where They Borrow, and Why.” The Pew Charitable Trusts. Accessed March 24, 2017 from http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2012/pewpaydaylendingreportpdf.pdf.
- Morgan, Donald and Pan, Kevin. “Do Payday Lenders Target Minorities?” LibertyStreetEconomics.com. Accessed on March 24, 2017 from http://libertystreeteconomics.newyorkfed.org/2012/02/do-payday-lenders-target-minorities.html
- Wicks, Tess. “How to Get Out of a Payday Loan.” MagnifyMoney.com. Accessed on March 24, 2017 from http://www.magnifymoney.com/blog/pay-down-my-debt/get-out-of-a-payday-loan388030511.
Borrowers Deserve Better than a Payday Loan: The Story Behind the 36% APR Benchmark
Jared Kaplan, CEO, OppLoans
May 31, 2016
The High Cost of Payday Loans
Ann Logue, MBA, CFA
June 15, 2016M
The Truth about Payday Loans
Ann Logue, MBA, CFA
June 18, 2016
Studies Show “Repeat-Use” for Payday Customers is Common
June 21, 2016
The 2016 State-by-State Payday Loan Regulation Guide
September 23, 2016
Payday Lending in America: How Small Dollar Loans Create Big Problems for Families and Communities
June 28, 2016
From our Blog
- To Payday or Not to Payday? (1 of 3) – Skipping the Drama of Payday Loans
- To Payday or Not to Payday? (2 of 3) – Predatory Lending’s Second Act
- To Payday or Not to Payday? (3 of 3) – The Final Act
- Escape the Payday Predator (1 of 3): Identify a Predatory Lender with these 5 Warning Signs
- Escape the Payday Predator (2 of 3): 3 Common Tactics Meant to Trap You in Debt
- Escape the Payday Predator (3 of 3): Fact-Checking the Payday Lenders
- How (and Why) to Calculate the APR for a Payday Loan
- Payday Loan Rollover: How Short-Term Loans Turn Into Long-Term Debt
- What is the Payday Loan Debt Cycle?
- What’s the Difference Between a Payday Loan and an Installment Loan?
- Avoiding Payday Loans: How to Deal With a Bounced Paycheck
- What’s Up with Payday Loans in Kansas City
- The Consumer Financial Protection Bureau Thinks You Deserve Better than a Payday Loan and OppLoans Agrees!
- The Politics of Payday: Why Netflix’s House of Cards and Payday Lenders Deserve Each Other