Risks and dangers involved with online payday and installment loans

Payday loans are very useful when you are suffering from money problems. Unlike debt consolidation services, payday loan lenders provide you quick $1500 cash without doing credit check. payday loan lenders operate either traditionally or through internet. You have to decide how you want to get it.

Risks involved with online payday loans

Most of the borrowers are not aware that there are lots of dangers and risks involved with online payday loans. But the fact is online payday loans do carry some risks for the borrowers. Here are some risks and dangers involved with online payday loans:

High APR: The Consumer Federation of America (CFA) has warned the consumers to be extremely careful while opting for online payday loans. There is valid reason for that. Some of the online lenders will not tell you the annual percentage rate (APR) before you apply for the online payday loans. Later on you may find that you are charged 650% annual interest rate (APR) on the loan. This will cost you a lot of your money

Overdraft fees: Several online payday loan lenders automatically renew loans by electronically withdrawing the money from the consumer’s checking account every payday. If the consumers don’t have adequate money in his bank account for repayment of the loan and the fee, then the bank will charge overdraft fees, bringing the cost of the payday loan higher.

Identity-theft: Another risk involved with online payday loans and online debt consolidation services is identity-theft. You are required to fill up an online payday loan application form as part of the application process. In the application form, you will have to divulge confidential personal information such as bank account number and social security number. Divulging such confidential information on the website can be dangerous. Several scammers drain your bank accounts with the help of this information.

High interest rates: Some of the payday loan lenders charge interest rates as high as 50%. Online payday loans usually costs between $10 and $50 for every $100 borrowed. So, just as you do a research on the interest rates charged by the financial institutions on the debt consolidation loans, you should also compare the interest rates charged by the online payday loan companies before signing anything. Installment loans ($3000 dollars) interest rates are are generally lower.

Finally, whether you take the help of debt consolidation services or the payday loans for solving your money problems, you should read the terms and conditions of the contract very carefully as sometimes hidden fees are written there.

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