March 18, 2018
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Payday Loans: Different Packages, Same Result

For those looking for small, short-term loans to help out in a jam before payday, you can easily be mislead and get into something that will only compound your financial problems. The payday loan industry, with triple digit interest rates, is a very fast growing industry, with billions of dollars in loan volume every year. They’re also very savvy in their marketing techniques that can easily confuse consumers. There are several different ways these types of loans are presented to consumers, but the bottom line is the same: stay away.

Refund Anticipation Loans
Tax preparation services partner with lenders to offer the refund immediately upon filing. Of course, subject to a fee and an exorbitant annual percentage rate, even though there is little risk for the lender. These loans are particularly popular among low-income taxpayers who are persuaded to get the refund immediately instead of waiting two weeks if e-filing.

Internet Lending
With the growing popularity of the internet, payday loans are now marketed through e-mail, online searches, and paid advertisements. They offer no credit checks, instant approval, and low fees. Convenient because everything is done online or by fax, a loan of $100 will typically cost $30 with an APR of 650%. After reviewing several homepages of some popular online payday lenders, none of them are straight forward enough to say what their fees or APR’s are.

Direct Deposit Advance
Offered by some mainstream banks to customers whose paychecks or benefits are directly deposited into their account. The borrower receives a cash advance and then on payday, the loan amount plus fees are deducted automatically from their account.

No matter what they’re called, or how they’re packaged, the reality is that these loans take advantage of people who are in a financial crisis and don’t offer any real long-term help.




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