Pay Day - Cash Advance Loan Warning
Many check cashing stores provide small, short-term loans commonly known as “payday loans” or “cash-advance loans,” in exchange for a person's post-dated pay check and an additional service fee. But the Florida Office of Financial Regulation warns the in-store fees can be very costly, especially if a person is unable to pay off the loan quickly.
Unlike local payday loans, many online payday lenders require bank account information, allowing the lender immediate access to a person’s funds. This practice can leave the borrower extremely vulnerable, as the lender can withdraw more money than expected from their account.
The Florida Office of Financial Regulation regulates payday lenders and under Florida law, payday loans cannot be made in any amount greater than $500 and consumers may only have one outstanding loan at any time.
Additionally, payday lenders may not charge fees that exceed ten percent of the currency or payment instrument provided.
Payday and cash-advance loans are not meant to be long-term loans. These types of loans are intended to assist consumers through unanticipated and difficult financial times.
Consider these tips before choosing a payday or cash-advance loan:
Shop Around. Compare interest rates and fees when borrowing money. Find out what the total cost of the loan will be before making a decision.
Stay Local. Be wary of online payday loans. Not only do you risk exposing your personal information to criminals, online loans normally have higher fees and interest rates than loans applied for through a local lender. Dealing with unlicensed online-only payday lenders makes it difficult to resolve potential problems and these companies may be located out of state or outside the country.
Be Cautious. Avoid lenders that promise guaranteed and low-interest loans, take applications over the phone, ask for fees upfront, and do not ask for background information outside of the bank account number.
Ask Questions. Consumers have the legal right to know the total cost of the loan, the monthly payments, the annual percentage rate, and how long they have to pay the loan back.
Protect Yourself. Borrow only what you can afford to pay back. Consider other options such as a small loan from your credit union or small loan company, or a loan from family or friend