Protection from Payday Loan Scams
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Protecting yourself from payday loan scams requires understanding how payday loans work and then knowing what to look out for as you choose a payday loan company.
Understanding Payday Loans
The payday loan industry suffered a "black eye" from the many payday loan scams taking advantage of those in need of short-term funds. Charging fees incorrectly or illegally is just one way payday loan scams can unfold. But payday lending is a legitimate borrowing tool when used appropriately and knowledgeably. Understanding what payday loans are can help borrowers avoid scams.
Payday loans are small loans, usually between $50 and $500, and usually for about a two-week period. The streamlined application process gets money in the borrower's hands in about a day or less. Lenders typically require no credit check. The borrower commits to repay the loan plus a fee in the time agreed.
This fee equates to a very high interest rate. All interest rates reflect the risk the lender assumer. For an unsecured loan with limited background check, the risk is high
Payday loans have a variety of names - cash advance loans and check advance loans among them. Often, the borrower post-dates a check for the loan amount plus fees and must have sufficient funds to cover that check or make arrangements to roll the loan over - for an additional fee - by the end of the loan term.
Check Lenders Out
Knowledge is the simplest protection for you against payday loan scams. If in your personal financial situation, a payday loan is a good alternative, do a simple online check of any payday loan firm you are considering using.
Check with the Better Business Bureau, look for any news stories on the business and, of course, read all customer reviews. There is no guarantee that customer reviews are accurate, but these can get you started on determining a payday lender's suitability for you.
Avoid Advance Fees
An alert for payday loan scams includes any lender asking you to pay the fee before you have your money. In many states, this practice is illegal. In any state, there are lenders who do not do this. The Internet makes this among the more challenging payday loan scams to avoid. With an easy, anonymous application process, some borrowers transfer funds from a bank account to the lender as an advance fee and then never receive the promised loan.
No reputable lender will ask for fees before your loan is funded.
Lending Alternatives
Another protection from payday loan scams is to not use payday loans at all. There are many alternatives for short-term lending. Friends or family is the simplest. But a credit union or bank also is an alternative. Payday loans are quick and easy to get, but the snowball effect of rolling the loan over can also quickly make it very expensive.
You're Not Alone
If you take out a payday loan and believe you've been scammed, you have help. Payday lenders are regulated in every state that allows them to operate by the state banking department or its equivalent. They will have a consumer help section where you can go to explain your problem. Additionally, the U.S. Department of Housing and Urban Development offers free counseling for credit issues.
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Understanding Payday Loans
The payday loan industry suffered a "black eye" from the many payday loan scams taking advantage of those in need of short-term funds. Charging fees incorrectly or illegally is just one way payday loan scams can unfold. But payday lending is a legitimate borrowing tool when used appropriately and knowledgeably. Understanding what payday loans are can help borrowers avoid scams.
Payday loans are small loans, usually between $50 and $500, and usually for about a two-week period. The streamlined application process gets money in the borrower's hands in about a day or less. Lenders typically require no credit check. The borrower commits to repay the loan plus a fee in the time agreed.
This fee equates to a very high interest rate. All interest rates reflect the risk the lender assumer. For an unsecured loan with limited background check, the risk is high
Payday loans have a variety of names - cash advance loans and check advance loans among them. Often, the borrower post-dates a check for the loan amount plus fees and must have sufficient funds to cover that check or make arrangements to roll the loan over - for an additional fee - by the end of the loan term.
Check Lenders Out
Knowledge is the simplest protection for you against payday loan scams. If in your personal financial situation, a payday loan is a good alternative, do a simple online check of any payday loan firm you are considering using.
Check with the Better Business Bureau, look for any news stories on the business and, of course, read all customer reviews. There is no guarantee that customer reviews are accurate, but these can get you started on determining a payday lender's suitability for you.
Avoid Advance Fees
An alert for payday loan scams includes any lender asking you to pay the fee before you have your money. In many states, this practice is illegal. In any state, there are lenders who do not do this. The Internet makes this among the more challenging payday loan scams to avoid. With an easy, anonymous application process, some borrowers transfer funds from a bank account to the lender as an advance fee and then never receive the promised loan.
No reputable lender will ask for fees before your loan is funded.
Lending Alternatives
Another protection from payday loan scams is to not use payday loans at all. There are many alternatives for short-term lending. Friends or family is the simplest. But a credit union or bank also is an alternative. Payday loans are quick and easy to get, but the snowball effect of rolling the loan over can also quickly make it very expensive.
You're Not Alone
If you take out a payday loan and believe you've been scammed, you have help. Payday lenders are regulated in every state that allows them to operate by the state banking department or its equivalent. They will have a consumer help section where you can go to explain your problem. Additionally, the U.S. Department of Housing and Urban Development offers free counseling for credit issues.
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