Getting a payday loan is already risky — if you don’t pay it back, sooner or later it could destroy your credit. But when it comes to online payday loans and private loans, you just can’t be sure whether these sites are safe.
Sure you have big names like Money Mart, who process around $1 billion annually, and with them it’s not such a concern. But when you find any random ‘no credit check’ or ‘family allowance approved’ loan, you certainly have a reason to worry.
These emergency financing methods can be advantageous at times. So we don’t want to filter them out but we do want to stress on the importance for due caution.
But if you want to get a full understanding, there are some points to cover first.
Do Payday Loans Put Your Identity at Risk?
Yes, but not necessarily any more than any other type of finance site. Even payment processors like PayPal are subject to phishing attacks. In these instances, hackers are attempting to collect your private data to commit identity fraud. It’s the same scenario for payday loan sites — whether it’s a fake company collecting information or an actual phishing site.
Furthermore, there have not been any major payday loan company data breaches — yet even big name like Target have had their databases compromised before. So the insinuation that it’s super dangerous to sign up for these sites is wrong — the mistake comes in choosing the wrong sites in the first place. In comparison, if you buy stolen goods off the corner it could also prove to be more problematic than purchasing them at your closest Wal-Mart.
So here’s the trick …
You need to know how to find out which payday lenders are trustable.
Just because a site says, “Get $$$ Today!” doesn’t mean it will really happen for you. Most of the sites you find are just lead generators sending you to one of the major lenders. Some send you to other, random offers. Even if one is legitimate, it just takes a data breach to expose your details.
That’s why the best bet is to just apply in person. You can get your loan funded just as quickly, it’s just one extra step. Then you only have to trust the company directly and their employee handling your information. Otherwise, it’s too easy for a fraudster to steal your details whether through a fake company or by data compromise later.
Which Payday Lenders Can You Trust?
Generally speaking, you need to go beyond just looking at whether one or a few parameters check out. For instance, don’t base your ability to trust a lender according to just something like whether they have a “HTTP” or “HTTPS” website. It’s not about whether they have a SSL certificate, although you will only want to deal with businesses that do. In the end, it’s a matter of the different ways a company chooses to handle your information.
For once, read the privacy polices, the terms of conditions, and any other legal fine print!
With the Money Mart example, they have faced many regulatory expectations and thus their system is as robust and secure as possible. If you deal with a small payday lender on the Web, chances are we aren’t talking $1 billion processed yearly. So get a feel for how much the lender has managed and whether they would have the appropriate protocols in place.
Also, really do your background research!
The sad thing is that most of the payday loan scams can be spotted a mile away. And the ones that are just there to collect your information are obvious tricks.
There are two things you can do:
- Domain background search – look to see how long ago they registered their domain via a Whois domain lookup. Similarly, Archive.org can help you to see how a website operated in previous years through viewing archived pages.
- Business background search – look through Google to see what type of history the business has, search by company name, site name, phone number, address, and any other identifying information you can find.
This will draw a picture for what you are facing. If the company can be trusted, they will have a verified background. Otherwise there will be discrepancies, a lack of history, or obviously bad stuff that comes up.
Don’t Just Trust Payday Loan Reviews
A lot of payday loan reviews are written by affiliate marketers and even the fraudsters themselves. The only good thing about reviews being on the Web is that the site isn’t lurking in the shadows. The more these companies have to critique about, the better. This makes it easier for victims to track their experience back to the specific illicit companies.
However, sometimes reading payday loan reviews will give you insight on what good is about to come your way. The clearest example of this is if you can find a lot of user experiences that are positive. But not just from random websites — you want reviews on Google Maps, Yelps, with the Better Business Bureau, and even GlassDoor.
Yup … that’s a review site for employees to brag or criticize about their previous or current employer … if they are a longstanding business, you might have an idea on their integrity this way.
Next, you could just refer back to our Top 10 Payday Lenders piece. This list is current as of writing this (May 2016) and each of these companies have been thoroughly vetted.
Payday Loan Advertising and Marketing Scams
It is important to differentiate a payday loan scam from an advertising and/or marketing scam. The thing is that payday lenders get a bad rep in the first place, and they are often labeled as a scam for reasons that are not fraudulent. For example, even when they charge within the legal APR rate, they are constantly ragged as scammers for charging, “too much,” on loans.
You really need to know what you’re getting into and even better how you’re going to get out of it because it is a temporary fix. If you expect it to become a long-term resolve, you are setting yourself up for disaster. For those that had a credit card they just couldn’t get paid off for many years even when trying their hardest — this payday loan will be a horrible dejavu of then.
So set up a budget plan to repay your loan.
If you are borrowing $1,000, you can expect to pay hundreds back on top of it by your next payday. Leaving this unpaid would set you back another few hundred and a late fee. If the debt ran any further, you can pretty much guarantee you won’t ever be able to pay it back and by then you’ll be begging the lender to send it to collections.
Ultimately, it is a high amount to pay on an emergency loan but when you have nowhere else to get it then it could be necessary. Out of all the payday loan providers we have reviewed, the best rate we could find was a 6% APR. This is actually very good — the worst rates we saw from quality lenders were in the range of 2,290% APR.
So even though you might be guaranteed a ‘no credit credit check approval’ it might be better to avoid the loan altogether. But again, if it’s an emergency by all means go ahead.
Which Payday Lender Should You Choose?
Stick with legit loan companies only.
Next to them, go by ranking in our top-10 list. If you only need a smaller amount (far below $1,000) then also look for the best option based on that. Only a few of these lenders will lend under $1,000 unfortunately.
Also, consider peer-to-peer lending as an alternative — the verification process might be a little longer but in the end you will get easy funding and sometimes good rates. We discussed what peer-to-peer lending is all about and if you’re interested.
Conclusion: Payday Loans Are Safe, If You’re Safe
It all really comes down to how you handle your information. Now you have no excuse, if you weren’t aware before it’s now clear that payday lenders are not all frauds. But there are bad apples just like with other businesses — you have to watch out for those Facebook, Runescape, and even Plenty of Fish account stealers too!
But the worst thing is sometimes the information stolen by fake payday lending sites gets dumped right back onto the Web. This becomes indexed and easily available to anyone and everyone. Just by looking you up, the details that are revealed are incredibly personal. The same thing happens with scam web hosting offers.
So, again, your best bet is to stick with a top payday loan provider as they will be likely to handle your information securely. If something bad happens, like when Target had a data breach, you will find out and have a chance to have it fixed and likely at their expense.