How to Avoid Payday Loan Scams

When you’re in desperate need of cash, but can’t rely on your credit card, payday loans can help you temporarily solve your financial issues. However, with the rise of online lenders, it’s easy to stumble upon scams and get yourself into trouble.

One day you’re looking for payday loans near San Jose, and the next thing you know is that you owe high amounts of money to liquidators or scammers. You can never be too careful when it comes to signing contracts or giving your personal data online.

So, check well before borrowing money from payday lenders, to make sure you’re doing business with trustworthy financial organizations. Here is the ultimate guide to protecting yourself and your finances from payday loan scams.

Read The Laws Governing Payday Loans in Your State

The best way to protect yourself against payday loan scams is by learning the local law. Many states have specific rules for lenders, specially made to protect citizens from fraud and vicious cycles of debt.

In all states, as a borrower, you have rights, not only responsibilities. Before signing any type of contract, you should receive the following information:

  • The amount of the total debt – including principal, interest rate, estimated interest, together with all the charges and fees on loan;
  • The loan repayment schedule – it says the number of payments, their frequency, the amount of each payment and when it’s due;
  • Other fees you could expect – in the case of late payments or litigation costs;
  • Any repayment penalty – for the situation in which you could pay off debt ahead of time;
  • The contact information of the lender – the company’s name, phone number, and street address.

Besides these general rules, every state has its own regulations. You can research more on this topic by reading the legal status of payday loans by state, to see what rules apply to the area where you live.

Check If The Payday Lender Is Licensed in Your State

When you’re borrowing money online, it’s harder to track the lender and see what laws apply to the company. That’s why it’s better if you verify if the payday lender is licensed in your state before taking the money.

You can verify the information with the state regulator, to make sure you don’t get trapped in a scam. Another reliable source of information about licensed payday lenders is your attorney general.

Read All Terms and Conditions, to Avoid Hidden Fees

Payday loans are popular because you get the money fast, without all the hassle of filling tons of documents. However, you still have to sign a contract. And, to protect yourself, you should read it and make sure you understand every part of it.

Review all Terms and Conditions and ask for more details if you don’t understand the terminology used in the contract. Don’t sign a document without reading it. It’s the best way to stay out of trouble and avoid more debt.

The contract should specify all fees clearly. Hidden interest and charges are illegal.

Don’t Pay Upfront Fees

All payday lenders have fees and charge for their services. However, they take this money from the amount you borrow. Any upfront fee should be a red flag letting you know that you’re dealing with a scammer.

Money for ‘insurance’, ‘paperwork’, or ‘processing’ isn’t necessary when you work with licensed financial services providers. If the lender you found online asks for such fees, look for help somewhere else.

Look for Reviews Online

Online reviews are an excellent tool to check a lender’s history. Take a couple of hours to compare more payday loans lenders and their offers before deciding. Look for feedback from other customers. A lousy reputation among borrowers is a sign you should walk away, while some 5-star reviews can guide you towards a good deal.

Payday loans are always the expensive alternative when it comes to getting money fast. Don’t make your life harder by doing business with companies that value more the profit than the customer.

Don’t Leave Personal Data on Unsecured Websites

A lender that has no interest in your credit card history, but can’t wait to get your Social Security Number is most probably a scammer. Identity theft is more common than you can imagine. By giving sensitive data to strangers online, you put your safety at risk.

Make sure the website you’re using to fill documents for getting a loan is secure. Look at the URL; if it begins with ‘https’, it means it is secured using an SSL Certificate.

However, this doesn’t guarantee that the company is trustworthy. Look for signs that the lender is real – contact information, updates fees and content, a privacy statement, or other clues that tell you more about the people behind the company.

Search for additional information on Google to see if other people had any experiences with the company. When there’s no other information online about the lender but their website, you have another red flag that warns you about a possible scam.

Don’t Trust Cold Phone Calls or Emails

No state in the US allows companies to promise payday loans by phone. Cold calls and emails are clear signs of scams. With so many unsecured websites, it’s easy for scammers to get your personal data and guide into a fraud.

Don’t accept any agreements over the phone or email. Don’t sign any documents after having a phone conversation that you haven’t initiated. Telephone scams related to payday loans aren’t new. Don’t give your data to strangers.

Scammers often threaten people with legal actions and even arrest. You can’t be arrested for defaulting on a payday loan! You must appear in court when called, but you don’t go to jail for not having the money to pay your debt.

To Wrap It All Up

Scammers work hard to create a real presence online and off. Just because you see a company promoting its services on TV or on street panels, it doesn’t seem they’re looking to help you.

Use reliable sources to check all the information online. There are podcasts and dedicated websites where you can learn more about how to protect yourself from payday loan scams. You can also use these sources to find out more about a financial institution before signing a loan contract.

Author: Oliver Curtis

Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.

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