Payday Loan Scams: How to Avoid a Payday Loan Scam?
PayDay loans first seem to be for consumers looking for short-term financial respite prior to their next payday. But taking out a PayDay loan, which is frequently accepted online following a quick credit check, has both obvious and covert risks.
Anyone could be the target of scammers trying to pressure them and claim outstanding payday loans they never even applied for.
But here’s the thing, even if someone chooses not to acquire a payday loan, one could still end up being duped. Your information could fall into the hands of a fraudster who would use it to attempt and collect on a debt you never took out. Here’s how payday loan scams work and how you may respond.
What Is a Payday Loan?
A payday loan is a kind of without any credit check loan that is intended for people with bad credit ratings and, most frequently, low incomes. They are intended to be an “advance” on the borrower’s paycheck and are typically a little higher than some hundred dollars. The fact that the deadline is typically scheduled for the borrower’s following payday is how they received their name. For essentially the same reason, they are also known as “cash advance” loans.
It seems like a practical service at first. Payday loans, however, focus on those who are in need of money badly. They are quick loans. Without needing to await a credit check, the money is available right now. In actuality, creditors favor borrowers with poor credit. Although it’s simple to obtain these high-interest loans, the need for speed also fosters a market that’s attractive to con artists.
How Do Payday Loan Scams Work?
Scammers are aware that borrowers of payday loans frequently face severe financial hardships, which makes them less likely to study the terms of their loans or research the lender.
Due to this, borrowers are vulnerable in two ways:
- People in need are more likely to provide personal information to strangers, including their social security number, date of birth, and financial information. Most scammers will gather this data without ever intending to make a loan; instead, they do it in order to steal money from their victim’s bank accounts or use their social security numbers in other forms of identity theft.
- Although a scammer may really deliver you the money, the agreement will also include unauthorized charges and lending terms.
When this occurs, lenders will pressure you to sign the document before you have had a chance to read the terms, or else they will begin pestering you on payments you weren’t anticipating once the loan has been approved. In some cases, they will even threaten you as well as your family to persuade you to pay.
What Are the Signs That You Are Being Scammed?
Watch out for these six warning signs if you’ve asked for a payday loan:
1. You haven’t ever taken out a payday loan.
Although the victims of these scams are typically those who have submitted a payday loan application, scammers also frequently target those who haven’t or have submitted an application but haven’t yet received approval for a loan. It goes without saying that you cannot be late on a debt that you never got. You’re speaking with a scammer if your application is incomplete or if the loan provider to which you applied hasn’t responded to you yet.
2. The caller threatens you with arrest and demands payment.
Fraudulent alliances between scammers and law enforcement organizations are frequently used to get victims to cooperate. A trustworthy loan provider won’t ever threaten to have you arrested right away.
3. The caller dodges questions about his collection company’s identity.
They should have no trouble identifying the agency by name if the caller claims to be from a collection agency. If they won’t, you might be dealing with a con.
4. There is no information available regarding the alleged agency the caller represents.
Sometimes the caller will give the name of the organization, but the business is a total fraud. Make a quick search to discover what the web has to report about this organization if you have any doubts about the call.
5. No validation notice has been mailed to you.
A validation letter must be given to the debtor by anyone working on behalf of a collection agency who wants to try and collect an unpaid debt, according to the law. The borrower will be advised in this letter that they have 30 days to contest the debt. It will also specify how much money is owed and who must receive it.
6. Only instant payment over the call is accepted by the caller.
They would be pleased to figure out a payment schedule with you and give you an address where you can send your payments if the caller is contacting you in place of an actual collections agency.
What to Do If This Happens to You?
You should first cut off all contact with the person who has been phoning you if you think they are a scammer targeting you. Simply hang up if you pick up the phone and a debt collector calls you instead. You might be able to prevent the person from contacting you again if you have a mobile phone. In such a case, ignore any subsequent calls from such a contact. In the event that these fraudsters leave voicemails, erase them and decline the contact.
File a report right away after receiving the call or listening to the voicemail. File a complaint with the Consumer Financial Protection Bureau (CFPB) as soon as you can if you believe that you are being targeted by con artists posing as debt collectors.
Finally, close any potentially vulnerable bank and credit card accounts if you’re concerned that scammers may have access to them.
How to Avoid Payday Loan Scams?
First of all, avoid getting a payday loan if at all possible. There are less expensive options.
Payday Loans Alternative
Credit unions provide payday alternative loans (PALs). The rate of interest is limited to 28 percent, yet they are extremely comparable to payday loans.
Applications for Cash Advance
Take a look at cash advance applications. These more recent products, often known as paycheck advance applications, provide the same fast short-term loans that payday lenders do without charging interest. Instead, the majority will want a “tip,” while some may impose a little monthly fee.
Additional Options for Payday Loans
You can also look into a few other possibilities, such as requesting your employer for a salary advance, getting a personal loan, using your credit card to receive a cash advance, peer-to-peer financing or perhaps contacting your creditor to ask for a payment extension.
