How to avoid predatory lenders

 How to avoid predatory lenders

There are plenty of reputable online lenders, but they compete alongside predatory lenders that offer payday and other no-credit-check loans.

These types of loans should be considered only as a last resort after you’ve exhausted alternatives to high-cost loans.

Watch for these warning signs:

Sky-high APRs: Predatory loans charge extremely high rates — sometimes in the triple digits. The costs are often framed as fees, such as $20 for every $100 borrowed. For a typical two-week payday loan, that translates to an APR of about 521%. You can use a payday loan calculator to compare costs.

No credit check: Lenders that don't assess your credit or income can't determine if you can actually afford to repay the loan. They make up for this risk with high fees and short terms that make repayment difficult for borrowers.

Payments aren’t reported to credit bureaus. Predatory lenders typically don’t report on-time payments, meaning the loan won’t help you build credit. But they may report missed payments or loans in default, which hurts your credit score.

Consumer complaints. Check the lender’s rating, customer reviews and complaints on sites like the Better Business Bureau and the Consumer Financial Protection Bureau’s complaint database.