Payday loan lenders only no credit checks are predators
There are 10 ways a payday loan charges an illegal interest rate. Payday loan companies (also known as alternative lenders, fringe lenders and high risk lenders) are predators. Payday lenders prey upon the population that can least afford it – people in financial difficulty who don’t qualify for a loan from a traditional financial institution because they deem them too high risk. Some of these predators don’t even have to pay for store fronts as many are payday loan lenders online and issue a payday loan online only.
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There is no such thing as the best online payday loan companies
The legal limit for interest rates on a loan is 60% per annum according to the Criminal Code of Canada. So how do online payday loan companies get away with charging way over 60% for payday loans online?
The ten ways payday loan companies charge illegal interest
They get away with it by charging fees instead of calling it interest, however the Criminal Code of Canada considers the following interest, which are all charged on a payday loan:
- Interest
- Administration fees
- Setup fees
- Processing fees
- Convenience charges
- Verification fees
- Brokers’ fees
- Collection fees
- Loan repayment fees
- Renewal fees
What does this mean in dollars and cents? Service fees for high risk loans online usually cost $10 to $35 for every $100 borrowed, or 10% to 35% of the amount of the loan. A $300 payday loan, due in two weeks, may cost you between $30 and $105, depending on the fees that apply. This is the amount that you’ll owe in two weeks! Not a per annum interest rate! As you can see in almost all cases these charges by this type of lender only will push the true interest rate for payday loans way above the legal limit of 60% per annum.
Are new payday loan companies regulated?
Alternative lender companies online, or in store fronts, new or old, are privately owned and not regulated by the federal government; however, several provincial governments have taken payday lenders to court over the amount of interest and fees that they charge for these high risk loans. In the U.S. 25 states have passed laws against predatory lending, placing restrictions on high-cost loans.
Can payday loan companies sue you?
The answer is yes, but it will be worth your while to challenge the fees charged by payday loans online (which are actually interest in disguise) and allow yourself to be taken to court. Otherwise the consequences can ruin you financially. There are many cases where when people defend and show they are not intimidated, these companies do not pursue the lawsuit.
There was a recent case in the U.S, where a $1,000 loan ballooned into a $40,000 debt and the worst part was that it was legal. A woman in St. Louis borrowed $1,000 from an alternative loan company and like many, she couldn’t pay it back in time. The lender sued her and even though she agreed to pay it back in instalments, the loan continued to grow at 240% interest. Investigative journalists stepped in and the case settled quietly. Had there been no settlement the $1,000 loan would have ballooned to $40,000.
For more information on the risks of payday loans online please review our blogs on the subject:
- Payday Loan Companies: Are You Into Pawn?
- Payday Loan Companies: There Are Options
- Payday Loan Companies – Update
- Payday Loans Are Not The Answer To Your Financial Problems
- Payday Loans: Ontario Cracks Down On The Cash Store
- Canadian Payday Loans No Credit Check: Too Good To Be True!
- Payday Loans Toronto No Credit Check
What should you do?
There is never a good reason to take out a high risk loans online. There is also no such thing as safe payday loan companies. Contact a professional trustee instead. The Ira Smith team can help. Starting Over, Starting Now you can take the first step towards financial health.
