How To Protect Yourself From Payday Loan Scams
Payday loans can provide the immediate cash you need. Even so, it is important to not let the lure of quick money blind you from your common sense.
There are many scammers and predators out there who want to seize money from unsuspecting victims. Payday loan scams are all too common in the United States. With the rise of online applications, it is crucial to be cautious of payday loan scams. Otherwise, you could lose your identity and put your money at risk.
Why do people apply for payday loans?
Payday loans are short-term loans you can get quickly without having to fill out paperwork or go through credit checks.
If you require a smaller amount than $500, banks are not often an option. This is especially true for those with poor credit.
Although payday loans are advertised as being great for emergencies, most Americans use them to pay their regular living expenses.
Pew Charitable Trust’s study found that 69 percent of respondents used their first payday loan for utilities, credit card payments, or food.
What is the catch in payday loans?
Payday loans are expensive. Payday lending is allowed in most states. However, it’s easy to get into a cycle of debt. Even if the payday loan company is legitimate and law-abiding, there are still risks. You run the greatest risk of falling prey to payday loan scams.
How can you protect yourself from payday loan scams?
Check for licensing
Payday loan states allow businesses to apply for a license that will certify them as direct payday lenders. When you are looking for payday loan services, you must check for this license.
A licensed business must adhere to all state laws to avoid having its license revoked. In this way, you will have greater protection if there is a problem.
Many shady loan services are either not licensed or run from outside the U.S., so they don’t have to follow any regulations. These services are to be avoided as you will not be protected if you borrow money from them.
Be aware of hidden fees
Before signing anything, make sure you read the terms. Hidden fees are a way for predatory lending companies to get customers under their skin.
The maximum fee per $100 borrowed is set by most states.
Send no money in advance
Have you ever seen a story about someone sending money to Nigeria after being told that they had inherited a lot of money?
This kind of fraud is common in payday loan scams. A disreputable service may ask for money to pay taxes or to process your application. This is a sign that you are not dealing directly with a payday loan company. When your payment is due, authentic payday loan companies will collect all fees.
Find their contact information
Talking to representatives over the phone is a great way to make contact with a lending company. Many payday loan companies have physical locations that you can visit to speak with someone.
You should be wary of services that provide only an email address. To be certain you are dealing with a U.S.-based company, it is important to find a physical address.
Check out their BBB rating
Although it’s not a perfect way to ensure reliability, the Better Business Bureau can be a valuable resource for consumers. The BBB allows you to find important information about the company. This includes past violations, customer complaints received, how they were handled, and a rating on its overall performance.
Is the service not listed in the BBB database? If yes, customers might not have filed any complaints or the company may not be registered in the U.S.
Are all payday loan services scams?
Not all. Oak Park Financial is a company that takes a different approach than many of its peers. Recurrent borrowers can earn points that they can use to borrow more money over a longer period, and at lower interest rates.
You can earn points by making timely payments and enrolling in online financial education courses. The best part? Oak Park Financial sends your payment status to Equifax, TransUnion, and Experian to help you build your credit. This is something that most payday loan companies don’t do.
Although payday loan fraud is rampant, there are many services available that can help you.
It is not a good idea to take out more payday loans than you need. Before you turn to a payday loan company, it is advisable to borrow from friends and get a loan from your employer if you have an emergency.
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