Payday installment loans are one of the most popular financial resources for people with bad credit. Turned down by traditional lenders and banks, many people find financial relief with instant cash loan lenders. There are no credit checks involved, quick approval time and convenient loan applications.
However, some loan lenders take advantage of the financial needs of their consumers. They give the impression that they are doing you a great favor. Many financial counselors advise people to be very careful when choosing their payday installment loan lenders. Some are very elusive in exposing their predatory behavior. And before you know it, you have stepped into their trap.
It is important to shop around before closing a deal with any payday installment loan lender. Although we may not totally protect ourselves from predatory activities of some lenders, knowing the signs of their predatory behavior can be a big help. Here are some of the signs of predatory behaviors of loan lenders.
1. Short minimum loan term – Since payday installment loans are only short term loans, they are usually repaid within two weeks or on the next payday. However, surveys show that approximately 75% of the borrowers cannot fully repay their loan on the specified date. As a result, the borrower is forced to apply for a rollover on his loan at an additional cost. This is a strategy of predatory loan lenders in order for you to be stuck with them.
2. High interest rates – There is increased risk of the loan lender with a borrower who has poor credit scores. However, paying twice as much on what you have borrowed because of very high interest rates does not justify this reason.
3. Doesn’t consider your ability to repay – One strategy of predatory loan lenders is to let you borrow the maximum amount allowed, without considering your capability to repay. So if you are unable to repay the loan, they will collect additional fees and late payment charges.
4. Allowing you to get more than one loan at the same time. This is another sign of loan lenders expressing their predatory behavior. Most state laws prohibit a borrower from taking out more than one loan at the same time. However, predatory loan lenders offer other loan options in order to provide ways to charge additional expenses for the borrower. Be careful when you ask for payment extensions or repayment options so you won’t fall for this predatory marketing strategy of payday installment loan lenders.
5. Mandatory arbitration clause – When you sign up on a loan agreement be cautious about this part of the contract. Read the terms completely and understand them thoroughly. Some loan lenders include a clause in their contract to force you to give up your right to sue them for abusive and predatory behaviors in lending.
So, consumers of payday installment loans are advised to choose their lenders carefully. If you are already dealing with loan lender exhibiting signs of predatory behavior, you can report them to credit regulating agencies and to the authorities.