Unexpected medical bills. Being laid off from work. A sudden need for money can lead people to seek a quick source of cash. Online lending services are often eager to fulfill this desperate need, offering speedy loans without a credit check.
But these loans often come with a wide array of consequences, including as high interest rates, hidden extra fees, and contracts that are meant to drag out payments. Our office recently began advising clients about the dangers of online lending companies and possible red flags. Let’s take a look at some common tactics these companies use.Quick, no-credit check loans sound good, but are often high interest loans. The full cost of the loan is often not shown in their slick advertisements. Many of these companies will also spread out the minimum payments for loans in order to make them look cheaper. But in reality these will take longer and cost far more money in the long run. Predatory loans like these can have APRs of well over 300%. People end up paying several times the cost of the original loan without knowing it, leaving them with no choice but to file for bankruptcy.
Another common trick is an offer to rollover a loan. Online lenders may charge a fee to allow the borrower to continue owing a balance on the loan after the repayment date. This may sound like a life saver – a way to buy more time. But in reality it’s a tactic for the lender to get more money out of you. Multiple rollovers can lead to hundreds of dollars in extra fees and no relief.
Fair and equal access to credit is imperative. Some online lending agencies go against these ethical principles, and instead take advantage of customers’ desperate situations. There are some protective laws in effect in the U.S. For instance, the Military Lending Act shields active duty members from being charged interest rates that are higher than 36% on most consumer loans, including payday loans. Consumers need to set similar limits on interest rates they will accept so they can avoid these predatory loans.
Online lending services may also promote quick access to cash by connecting directly to your bank account. However, the intent is often malevolent. The companies will deposit money, but they will also withdraw repayments for their loans, putting you at risk for overdraft fees and setting you up for more financial difficulty. And if you do make your loan payments on time, you may get a follow-up offer refinance the loan. Once again, the intent is not innocent – you are being set up for even more risk in missing payments.
An often overlooked risk that comes with these types of online lending services is their inability to work with struggling customers. Many people have limited recourse if they run into trouble paying off a loan. Online lending companies are not tightly regulated in most states, allowing them to promote unfair business practices. Banks are usually open to working with credit counseling services and their customers. But online lenders are nowhere near as helpful when it comes to working with customers on other solutions like debt consolidation.
If you are an individual, couple, or business considering filing bankruptcy in Queens, New York, Contact the Law Offices of Bruce Feinstein, Esq. today for a Free Consultation.