Payday Lenders – Why You Shouldn’t Use Payday Lenders to Pay Off Your Credit Card

Unless you’ve been living in a cave for the past decade, you’ve probably heard of payday lenders. These companies essentially provide loans for people without checking credit, checking income, or even running credit checks. And in many cases, they can charge high interest rates and even threaten delinquent borrowers with criminal prosecution.

Interest rates range from 391% to 600%

Taking out a payday loan is not for the faint of heart. The APRs are astronomical and the loan fees are sky high. The best way to combat this is to shop around and compare rates.

There are many states across the country that offer payday lending. However, there are many state laws that limit the cost of a payday loan. For example, the state of Arkansas has a 36% cap on the cost of a payday loan. In November of last year, Nebraska voters voted in favor of a 36% cap on the cost of payday loan fees. Unlike the state of Arkansas, many states have no caps on the cost of a payday loan. The state of Oklahoma has a law that limits the cost of a payday loan to $500.

Payday loans may be a good deal if you can pay off the loan in a timely manner. However, if you can’t pay it off in a timely fashion, you may find yourself in a cycle of debt.

They don’t verify income or run credit checks

Using a payday loan to pay off your credit card bill is probably not your best bet. If you are in a tight financial bind, you might be better off tackling your debt with a personal loan from a traditional bank or credit union. A payday loan is a short term loan with a high interest rate. The loan is usually paid off by your next payday. The loan may be extended for a few weeks.

Payday lenders do not require a credit check or income verification to qualify for a loan. They typically require that you have an active bank account and a steady paycheck. However, the amount of cash you can borrow may be limited by state law. You may also be surprised to learn that the interest rate on a payday loan is high, as well. Unlike traditional bank loans, payday lenders do not report your payment history to credit bureaus, meaning you are not stuck with a high interest debt.

They threaten delinquent borrowers with criminal prosecution

Almost every year, millions of consumers are threatened with jail time because of unpaid debt. Private debt collectors are using the criminal justice system to terrify debtors into paying.

In an effort to bring payday lenders to justice, the Consumer Financial Protection Bureau (CFPB) has taken public action against them. The agency has filed lawsuits against several Payday loans in Maryland (MD) payday lenders and is pursuing a $10 million settlement against a nonbank consumer lender that engaged in deceptive practices.

In a press release, the Consumer Financial Protection Bureau said the lender violated the Fair Debt Collection Practices Act (FDCPA) by using deceptive and unfair practices. The agency also accused the lender of transferring delinquent borrowers’ debt to non-liable third parties. In addition, the agency said the lender’s in-house staff falsely threatened delinquent borrowers with litigation and criminal prosecution.

The CFPB says the lender used false claims to lure borrowers to apply for new loans. It also alleged that the lender staff continued to call borrowers after the agency prohibited its practices.

They’re loan flips

Typically, these lenders promise a certain interest rate or loan type. They then hold a «live» check as security, which allows them to have a lot of leverage over the borrower. In the case of a payday loan, the borrower pays the fees and interest on a single payment, but never pays off the principal.

Lenders can also perform a «loan flip,» which is when they refinance the borrower’s loan with another, higher-cost loan. This can also lead to unnecessary charges, since the borrower will not pay down the principal on the original loan. This type of lending is known as predatory lending. In some cases, the loan flip is accompanied by other forms of fraud.

Some of these types of loans are hard money loans, which use the borrower’s real estate as collateral. The borrower can expect to pay a high interest rate and fees. The lender will look at the value of the real estate and consider how much profit it can generate. If the borrower defaults, the lender will forfeit the property.