Start with trust. Check out the company's BBB Business Review to see its rating, history of complaints and other information.
Never pay an up-front fee. Some short-term loan providers will ask for a post-dated check to cover the amount you borrowed plus interest and fees. However, if any lender asks for those fees in cash before giving you any money, walk away - especially if it's an online lender asking for money via wire transfer. Charging up-front fees is illegal, and cash sent by wire cannot be traced.
Limit the amount you borrow. Only borrow what you know you can pay off with your first paycheck. Most companies will allow you to "rollover" the balance for several weeks or months, but tack on fees the whole time. This can result in you owing several times what you borrowed in the first place.
Know your rights. In Texas, payday lenders are required to disclose certain information before initiating a loan. That information includes the costs, how it compares to other loans and the interest rate if not paid in full. Members of the military enjoy even more protections, thanks to federal law.
Read the fine print. Pay close attention to fees and consequences of non-payment. Will the company allow you to make arrangements if you cannot pay? How quickly will the company repossess your car?
Keep your documentation. Many consumers said they started receiving calls from collections agencies years after they paid off a payday loan. Some of these calls were simple errors; others were attempts by scammers to collect a debt that is not owed. Protect yourself by having documentation that all loans were paid in full.
Know where to turn. If you feel a lender has committed fraud or taken advantage, file a complaint with BBB, the FTC and the Texas Attorney General.
This year, BBB has received more than 3,300 complaints nationwide against payday lenders.
Many of those complaints allege fraud - including companies initiating loans or withdrawing money without permission, or calling to collect a debt that the consumer claims was never owed. Other complaints allege poor customer service or unscrupulous collection tactics.
The FTC advises consumers to consider alternatives to payday lending if they need money fast, including small bank loans, credit counseling and credit cards.