One of the times you’re most vulnerable is when you’re in need of a payday loan. Generally speaking, you’re not in the best financial condition when you’re taking out a payday loan. You are in danger of being taken advantage of or even outright deceived when you’re desperate for cash.

Internet payday loans are especially dangerous. Yes, there are legitimate payday lenders online, and they’re definitely worth checking out when you need the cash and can’t get it somewhere else. But there are some important things that you need to be watching for, including:

• Privacy and security. To be able to apply for an Internet payday loan, you’re sending the company your personal information. Usually this will include personally identifying information like your Social Security number and/or driver’s license number, as well as your bank’s account number and routing number. In some cases, you’re sending these over unsecure links.
• Identity theft and fraud. When you’re disclosing personal information and opening your privacy like that, you’re exposing yourself to both fraud and identity theft.
• The debt trap. Like traditional payday loans, online payday loans can put you into a debt trap. You wind up being unable to pay off the first payday loan, so you either renew it or take another one out. Before you know it, you’ve spent several times the amount you originally borrowed just in fees. While this isn’t illegal, it certainly isn’t a good idea.

So, what do you do? How do you protect yourself from these dangers? You start by checking out the lender before you do any business. Check for online reviews, but also check for personal recommendations. In many cases, you’re better off borrowing from a friend or family member, and if that’s just not possible you might consider sticking with a traditional brick and mortar payday lender.

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The problem comes with some payday lenders who are operating outside of the law. Some lenders bend the law, and some outright break it. If you’re going to keep from being taken advantage of, you need to check out your lender before you sign for the loan.

Here are some things you can do to make sure your lender is legitimate:

• Verify the lender’s right to legally operate. If you’re going into a brick and mortar payday loan store, you can ask to see their state licenses. Every state has different regulations for lenders, but all require some sort of licensing.
• Read all of the documentation. No, it’s not likely that you’re going to understand every line in a payday loan contract. You can ask to take the contract and have an attorney look at it, but most of the time if you need a payday loan you probably don’t have money to hire an attorney. So, go through the contract and ask about anything that’s unclear.
• Check consumer reviews. A simple look at your local Better Business Bureau page can often tell you about how the company conducts business. You might also be able to find information about the company by searching through local news media websites to see if there have been stories looking at the lender.
• Be careful when borrowing online. There are online payday loan lenders. Not all of these lenders are able to operate in every state, however. Before you make any transaction online, verify that the business is legitimate.
• Don’t be afraid to wait. Obviously, if you need a payday loan, you’re under some time pressure. Still, sometimes waiting just a single day will present other opportunities. At the very least, it will give you some time to research the lender and make sure they’re legitimate.

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Unfortunately, there are scam artists out there that will also pretend to be collecting for a payday lender (or for credit card companies or other types of credit, as well). In reality, they’re nothing but thieves trying to separate you from your money.

To avoid getting scammed by a collection agent or someone pretending to be a collection agent, here are some things you should know:

• Know your rights. Under federal law, there are things that collection agencies can and can’t do. They can’t make threats against you. They can’t pretend to represent someone they’re not. One collection company in Kansas is said to have pretended to be calling from the State Police. These practices are illegal.
• Know who’s calling. Anyone trying to collect a debt from you has to identify the name of the company they’re calling from, as well as provide you with their street address. Don’t agree to talk to anyone who won’t provide you with this basic information.
• Know what you owe. Most of the time, when someone from a collection company calls, you know what it’s for. If the person on the other end of the phone is talking about debt that you don’t remember or aren’t aware of, they may be scamming you. A common tactic is to claim that you’ve bounced a check and then ask for checking account information to collect the money from the check.
• Know how to be safe. Don’t give out personally identifying information over the phone. Unless you’re 100 percent sure the caller is legitimate, you may be the target of identity theft.
• Know how to respond. You can report suspicion of scams to the Federal Trade Commission via their website. The same goes for legitimate collection agencies who don’t follow the laws regarding collection.

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Unfortunately, just because there isn’t a brick and mortar payday loan store in your town doesn’t mean that there aren’t people who want and need short-term loans. So, many of these folks will turn to the Internet.

There are plenty of payday loan companies on the Internet. Today, there are a greater number of more Internet-based payday loan providers than there have ever been. Many of these businesses are legitimate, to be sure, even if their fees and interest rates are much higher than what consumer advocates think they should be.

There are also plenty of scam artists out there. There is the case of a woman in  Maryland who wound up paying nearly $1,000 to a scam artist who promised to then loan her $5,000. Needless to say, the loan never happened and the woman wound up in more dire financial straits than she was before she turned to the online payday lender.

Part of the problem is that consumers just aren’t educated enough, in some cases, to recognize a payday loan scam online. You need to understand that any legitimate online payday loan company isn’t going to ask for any money upfront. The fee that you pay for the loan will be taken out of your checking account at the same time the amount you borrowed is taken out – usually about 14 days after you take out the loan.

Ultimately, online payday loan (like most things in life) are a case of buyer beware. You need to make sure the business you’re about to work with is a legitimate business, and that they’re following the law. If you suspect that a payday lender is illegitimate, you can also report it to the Federal Trade Commission.

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However, you have to think about the fees, the high interest rates and the punitive late fees. That’s one reason why many state assemblies are proposing legislation that is designed to lower the fees and cap the interest rates payday loan firms charge their customers.

If you need to obtain a payday loan and want to use it responsibly and not spend an excessive amount in fees and penalties, follow these three steps:

• Emergency use- Only use payday loans for true emergencies. If your gas bill is already late or you need gas in your car and the next check isn’t for two weeks, a payday loan might be the right choice. Resist using payday loans for a two day vacation or one hour shopping spree. Only use payday loans for essential, emergency items and situations.

• Understand the charges- Always get the fees and interest rate up front and in writing. If you can’t get it in writing, go to someone else.  Avoid any surprises.

• On time payments- Make every deadline when it comes to paying back your loan. It’s a fast route to financial disaster if you don’t. Many payday lenders charge excessive penalties and late fees when payments are missed. You want to avoid falling into this situation

If you follow these three tips, you should be able to manage your payday loan.

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Payday lenders are under fire constantly. Consumer advocates and politicians like to take shots at payday lenders. They use words like “usury” or phrases like “loan sharks.” They compare today’s payday lenders to mafia-connected loan sharks of the early 20th century.

Still, opponents fail to recognize something: there wouldn’t be payday lenders if people didn’t need small short-term loans. People needed them in the early 20th century, and people still need them in the early 21st century.

Back then, the loan sharks were also called “salary buyers.” They’d “buy” a person’s upcoming salary. They’d do it for a hefty fee, often charging as much as $30 per $100 borrowed. In today’s terms, that’s about twice what most payday lenders charge.

So, are payday lenders loan sharks or legitimate businesses? It depends, at least in part, on your own situation. If you don’t ever need a short-term loan, you might not have an opinion at all. If you need them often and have paid tons of fees, you might resent them and claim usury as well.

However, if you’re like many people who use payday loans as an occasional way to meet immediate expenses, you probably see them as a legitimate and even helpful business.

The question of whether these businesses should be shut down isn’t even the right question. The real question that consumer advocates should ask is, “what alternative can be offered to payday loans?” Instead of encouraging legislation to ban payday loans, they should focus their energies on finding alternatives. Whether that’s legislation that encourages traditional lenders to make smaller-dollar and shorter-term loans, or whether that’s some sort of charity work, it’ll probably do more good in the long run.

The biggest danger to consumers when it comes to payday loans seems to be the idea of rolling over. When you roll over a payday loan, you take out another loan on your payday to cover the previous loan. When you do this, the amount that you pay in fees grows and grows over time. Breaking the payday loan cycle is the only way to be sure you’re not being taken advantage of.

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One of the ways that consumers deal with immediate financial needs is with payday loans. These short-term loans give the customer cash today and that usually needs to be paid back within a couple of weeks. These loans have a high interest rate, but because they’re paid off quickly the actual fee can be less than other alternatives.

There are even online payday lenders. These payday lenders don’t require you to visit a payday loan store, but will take care of the payday loan process entirely online.  These loans are convenient, and usually no more expensive than payday loans taken out in person.

Unfortunately, this kind of payday loan also carries a risk. If a consumer doesn’t do their research or isn’t careful, they might fall for an online payday loan scam.

Rose Banks of Maryland found this out the hard way. She was in debt, way over her head and unable to make ends meet. Banks turned to the Internet to try to find someone to lend her the money she needed to stay afloat.

What Banks found, however, was something nefarious. She found an offer for a $5,000 loan through a company named “Brunswick Financial Group.” The company said they were willing to offer her the loan, but that she needed to send in a deposit as a security.

Banks then wired $930 to a woman in Canada. Banks never got her loan.

This type of loan is known as an “advance fee loan,” and is illegal in many places. Customers all too often learn the hard way that, when you give someone money for an advance fee loan, there’s no way to guarantee that you’re going to get the money promised you.

One warning sign that you might be facing an Internet payday loan scam is that the lender doesn’t ask you for verifying information, such as permission to run a credit report or a copy of your paycheck stub. The Federal Trade Commission offers other advice to consumers about how to avoid these kinds of Internet payday loan scams, as well.

The good news is that there are plenty of legitimate Internet payday loan websites. You just need to be diligent about verifying the site before you enter your personal information, and never send an advance fee to a company who claims they’ll give you a loan.