An Overview Of The Online Payday Loan Industry

Posted by Nick Niesen on November 8th, 2010

The advent of the new electronic communication technologies that have emerged over the past decade has had a profound impact not only on our day-to-day lives, but on our economic lives as well. One of the best and most convenient services enabled by the new technology today is payday loans, also called online cash advances. With the passage of each day, more and more online payday loan agencies are found on the net which advertise offers on websites that consumers frequently visit. These ads attract the notice of millions of consumers daily who are in the market for a short-term personal loan of a few hundred dollars.

People desiring to become borrowers fill out application forms online that take relevant information regarding the borrower. Lenders require such information as the borrower?s name, street address, email address, telephone numbers, driver?s license state and number, employer name and address, number of years/months with that employer, bank name, and the bank?s ID number within the banking system, called a routing number. In addition, borrowers have to provide their bank account number as well so that the lender can deposit the loan proceeds to it after the loan is approved.

There are things that borrowers should look for when searching online for a reputable payday loan provider. The primary concern should be to ensure that all of their information will remain safe, secure, and confidential and that the provider complies with all associated laws and regulations. For example, the annual interest rate needs to be disclosed openly on the website and any printed material as should all one-time and recurring fees that may apply. The borrower has the right to ask for a detailed written statement regarding these fees and rates prior to applying for a loan.

Though it is a fast, direct way to get needed funds, consumers are warned not to use online payday loans habitually. A recent survey of 100 payday loan websites conducted by the Consumer Federation of America (CFA), noticed that small loans derived from online access bye consumers were occasionally prone to abuse by consumers who used them to borrow more money than they should. This is a danger independent of the adequacy of the security and confidentiality measures taken by the website operators. Transmitting personal financial information through the Internet between online payday loan agencies and consumers actually entails less risk than cash, credit card, and check transactions on average. After all, thousands of huge bank-to-bank transactions, some exceeding one billion dollars, are online conducted each business day.

The Consumer Federation of America advises borrowers to avoid haste and to be cautious when selecting an online payday loan website. And the costs of borrowing may change from year to year, so repeat borrowers should always check the most recently posted rates and fees that will apply.

Online payday loans are marketed by the lenders and their marketing agents by means of personal and business referrals, e-mails, online searches, paid advertisements, and affiliate programs. A person who wishes to borrow money may either fill out the online application form or print and then fax the completed application to the online payday loan agencies, providing the information required for loan approval. Transacting personal business of any kind through the Internet should only be done when you, the consumer, are sure you are dealing with a legitimate business entity through a secure website process.