short loans online
short loans online

5 Signs Your Short Loans Online is a Debt Trap in Disguise

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If you’re looking for short loans online on Google or somewhere else, you’ll find yourself overwhelmed by the number of lenders offering short loans online to any borrowers out there. As such, it can be difficult to differentiate which one of them is actually good and is that’s not looking to rip you off or trap you in a debt cycle.

Short loans online

So, knowing what makes a short loan online dangerous can help you borrowers from falling into a debt trap. Here are the five signs that your short loan online is actually just a debt trap in disguise:

  1. It advertises as a no-credit-check loan

Some short loans online lenders will advertise the fact that their loan requires no-credit-check, meaning the lender doesn’t obtain information about the borrower’s financial history and as such, they will be unable to gauge their ability to repay the loan.

Predatory lenders will often charge a much higher annual percentage rate or APR to make up for borrowers that will inevitably end up defaulting on their loan, which of course should signal red flag for you as a borrower.

  • It focuses on monthly payments

Short loans online lenders that advertise low monthly payments without mentioning the APR or loan term should immediately set off an alarm as to whether or not you should get it. Lenders may do this to distract you from the loan’s terms and rates, says Kingsley.

Read: apply for short-term loan

And that’s because predatory short online lenders offer loans with high fees and interest rates, borrowers should focus as much on the full cost of the loan, which an APR represents as the monthly payments.

  • It has very high rates

The APR on your short loans online shouldn’t come out to more than 36% according to Charla Rios, a researcher from a consumer advocacy group, Center For Responsible Lending.

The maximum rate has been affirmed by multiple states and federal agencies because it gives borrowers a fair chance to repay the loan and as well as giving lenders incentives to offer affordable loans.

Many payday lenders charge APRs that breaks 100% and above, while also not making it as explicit as they could’ve on their homepage.

So, if you can’t see an APR range anywhere on your short loan online lenders’ website, you should be very cautious about involving yourself with them.

  • It has excessively long or short repayment periods

These sorts of loan lenders typically require borrowers to pay the loan back within a week or two. But some lenders offer small loans with high APRs and a very long repayment period against borrowers.

These loans can leave borrowers paying more on fees and interest than what they originally borrowed.

  • It requires an all-in-one payment as a requirement

A predatory lender could potentially have repayment terms that require a single payment or a handful of small payments, then a lump sum from their borrowers

The average payday loans take 36% of borrowers’ paycheck. If a borrower can’t get through their month without that income, they might take another loan to make up for the cost instead.

Thus, a reasonable loan repayment plan should center on a consistent share of each paycheck, rather than a balloon payment that can leave borrowers worse off than before.

Getting out of predatory loans

If you find yourself trapped in these predatory loans after reading the signs above, there are some things you can do to get out and get in better financial shape.

  1. Refinancing the loan

If you have a somewhat solid of credit score, you may be able to pay off these predatory short loans online with another loan from a reputable lender by taking advantage of the lower rates you’d get from a solid credit score. Thankfully, many credit unions offer low rates even to borrowers with undesirable credit.

  • Seek for a free advice

In these days and age, you will be able to find a nonprofit legal aid office in your area that offers free or at the very least inexpensive consultation. Another option may also be for you to search for a credit counselor to help you determine the best way moving forward.

  • Contact your attorney general

Even if writing to your attorney general won’t get you out of the loan you’re currently stuck in, it will at the very least create a record that you’ve encountered unsavory, predatory lending practices.

Read: short-term personal loan

And if there’s enough complaints from people such as yourselves that get scammed by short loans online lenders out there, it may be possible for the office to investigate it further.

  • Pay more than the minimum payment

Go through your budget and decide how much extra money you can use for your debt. Paying more than the minimum amount can help you save money on interest and help you get out of your short loan online debt faster.

If you’re still confused about it, try using credit card payoff calculators available online to help you understand the concept a little easier.

Conclusion

According to NerdWallet, legitimate short loans online lenders compete alongside scammers in the marketplace, making it difficult for amateurs and beginners to tell from the good and the bad.

So, before looking for a short loans online, consider your other options such as payday alternative loans, pawnshop loan, credit union, et cetera, that’s always available to you and weight down the risk. But if you decide that short loans online are the only option you have, beware of the signs above.

Paying attention to these small things can help you avoid the debt trap that these predatory lenders specifically made for you.

And with that ends today’s article about short 5 Signs Your Short Loans Online is a Debt Trap in Disguise. Thank you for making it this far through the article, and we hope that what you read can be useful for you one way or another.

If you have any questions about short loans online or other types of loans, let us know in the comments so we can help you work out your problems, or look for our other articles. Chances are we already have that topic covered as an article that you can also read. See you another time!