Payday Loans On The Internet Have Their Risks

By Charles Essmeier

If you have poor credit, or a past bankruptcy, it can be tough to take out a loan from a traditional lender. The payday loan business arose to offer short-term financing to individuals with little credit, and the industry is doing brisk business. There are now more payday loan stores in the United States than McDonald’s, Burger King and Subway restaurants combined.

The interest rates, or “fees” charged for payday loans can amount to 400% per year when viewed as annual interest. While they may be costly, quick cash loans are, indeed, easy to obtain, and borrowers need only have a bank account and a steady job to qualify.

An offshoot of the brick and mortar cash advance loan industry is the online lending business, and there are now thousands of Web sites that provide short-term loans. The lenders say that they can put the cash directly into your bank account in as little as 24 hours. Online loans are just as easy to obtain as financing from payday loan stores and they are open for business 24 hours a day. The convenience of doing business right from your home, rather than driving down to your local lender, has motivated countless people to take out loans on the Internet. Consumers should be aware, though, that taking out a loan from such lenders can be quite risky.


The risks linked to taking out a loan from online lenders include the following:

Potential identity theft – By giving out financial details to people that you don’t know via the Internet, customers face the risk of identity theft. Identity theft is a multimillion dollar criminal enterprise and those who engage in it are becoming more proficient by the day.

No limits on terms – If you live in New York, your nearby lender is bound by lending laws established by that state and you are protected by those laws. If you obtain cash online, the loan is subject to the laws of the jurisdiction in which the online lender resides, but you may have no protection. If the lender is located outside the United States, there may be no limits at all as to how much they may charge you. There may be nothing that you can do if the lender doesn’t honor the terms of your agreement.

Financial risk – Stealing from your bank account is a potential hazard of engaging in business with an online company. You really don’t know who the online lenders are or what their motives might be. Since Internet lenders put money into your bank account, they could theoretically take money out of your checking account, as well.

There are often alternatives to high priced lending, and you would be well advised to seek them out rather than to borrow money at high interest. If you absolutely must take out a cash advance loan, you would be better off doing so locally and in person, rather than on the World Wide Web.

About the Author: Copyright 2007 by Retro Marketing. Charles Essmeier is the owner of

, a site devoted to affiliate marketing, and

, a site devoted to debt consolidation, credit counseling, payday loans, financial scams and personal bankruptcy.


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