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Using Loans Responsibly

All loans and credit lines cost money. Whether it's a traditional loan offered by a bank or credit union or a non-traditional source of credit such as a payday loan company, the lender is going to make a profit from your loan. This is how a financial business works and remains viable.

Consumers need to do their part by being responsible when they are looking for new credit. This means determining if the money is truly needed and being confident that the loan can be repaid in a timely manner.

Responsible consumers should be able to choose where they want to go for a loan without interference from the government, consumer groups, or any other third parties. This is a personal decision, but one that should be made with all the facts and information readily available.

Loan companies should not be allowed to target and actively market known segments of society which are vulnerable to being victimized- the elderly, low-income and poorly educated individuals, and single mothers.

The Online Lenders Alliance represent companies who offer consumers useful and valuable information on ways to bridge the gap, money-wise, from paycheck to paycheck when dealing with unexpected medical emergencies, high utility bills, or necessary car repairs.

OLA and the companies it represents encourage consumers to be fully informed and aware of the risks involved with online borrowing. One of OLA's primary goals is to educate consumers about the online lending industry and the way it works. It can also provide credit counseling when deemed appropriate.

Using Online Short-Term Loans Responsibly

For consumers who need an immediate source of extra cash, online short-term loans can be very appealing. But they come with significant risks. Following are some smart suggestions that responsible consumers should consider:

  • Online short-term loans are as real as any other type of loan. The lender dictates the terms and the borrower must fully repay the loan according to those exact terms.
  • Make sure to read and fully understand any loan agreement before signing it. Lenders are legally required to provide written confirmation of any and all fees that will be charged to you, along with the annual percentage rate (APR), before you sign a loan agreement.
  • Online loans always come with a fee. Each time you have to renew or rollover the loan, you will be charged an additional fee for this service.
  • Be certain that the website you use for an online loan displays a safe and secure logo or security icon before entering any personal information or bank account data.
  • Never borrow more than you can afford to repay within the initial time period and always borrow the least amount of money possible.
  • Short term loans are not meant to be used as a long-term solution to debt problems. Be realisitic when committing to a short-term loan.
  • It is never wise to take on new debt to pay off old debt.

 

Credit Counseling Resources/Information

Another good source of information for consumer tips and budgeting information is the Community Financial Education Foundation. To visit the site, click CFEF.

 

The Federal Deposit Insurance Corporation (FDIC) also provides financial education and resources through their Adult Education Program, Money Smart. More information can be found at www.fdic.gov.

If you are experiencing serious financial hardship and need professional assistance, please contact the National Foundation for Credit Counseling at www.nfcc.org or 1-800-388-2227.

Also, to view lists of approved credit counseling services by the United States Justice Department, visit www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm.