Getting a payday loan and borrowing money in the US can be challenging and daunting, as there are of course predators looking to deceive consumers into accepting illegal loans across the country. One of the main things to look out for is lending companies that use slightly different names of legitimate companies to make misuse of personal information, or worse.
An article from the Federal Trade Commission announced that, in 2022, a company running a fraudulent payday lending scheme took more than $152 million from consumers, that was refunded and this was one of the multiple large-scale scams of the year.
Top Tips to Avoid Payday Loan Scams
Here we have curated a list of some of the best ways to minimise your risk of falling into a payday loan trap or scam, with our top 7 tips for looking for the best payday loan lender.
- Payment of Upfront Fees
This can be the first sign that the lender is not legitimate, as asking for any fees to be paid prior to getting the loan amount isn’t common practice. This can sometimes be in the form is an administration fee or any fee that is requested during the application process, but before getting the loan.
- Look for a License
Any company that is a financial lender, such as a payday loan provider, is required to be fully licensed and registered in their division. As payday loans are not universal across the country, it’s important to check what statutory citation is required for your specification region and compare it with what the lending company has.
Furthermore, some states prohibit payday lending, or similar, loan types completely, these are Arizona, Arkansas, Connecticut, Georgia, Illinois, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota, Vermont, and West Virginia.
- Small Differences in Naming
Payday lending scams often opt to use reputable company names and alter them slightly, with the intention to mislead and confuse consumers. Scammers want people to believe that their ‘company’ is legitimate. One way to avoid this kind of scam is to do your research prior to making the application and ensure you fact-check phone numbers, addresses and license numbers against the company name you think you’re using.
- Phone Call Offers
Companies that claim to be payday lenders and make offers or requisition personal information or money over the phone will likely be scammers trying to lead you into an illegal trap. Furthermore, if there is an eagerness from the lender to make a quick transaction or to get your personal information
- No Fine Print
As payday lenders are required to abide by the laws of their jurisdiction, there should be clear terms and conditions outlined and offered to borrowers before any financial transaction occurs. This should also be considered and reviewed before completing an online application form, too. You can often find the fine print on any legitimate payday lending company’s website.
- Instant Approval
Any payday lender that offers guaranteed or instant approval, without first ensuring the criteria of a borrower is likely an illegitimate company that offers false claims. As mentioned above, registered payday lenders must follow strict laws when offering short-term loans, so be sure to do your research and do not accept immediate approval before credit checks.
- Poor Online Reviews
Nowadays, most payday lenders offer online services and if you note that their company has a significant amount of bad reviews, you should rethink your decision of opting for them. You can find reviews from the lender’s direct website or any other independent review sites.
If you encounter any of the above with a payday lender, be sure to revaluate the decision to use them and instead search for a legitimate payday lender. Be sure to first read through the terms and conditions and loan agreement contract before signing, and ask questions as needed.
When Should I Consider Getting a Payday Loan?
People often consider applying for payday loans during times of financial emergencies, such as when unexpected bills arise, including healthcare bills or sudden car repairs. Payday loans are also one of the only ways that people with no credit or bad credit can access fast cash, as there are usually less stringent eligibility requirements.
It is important to be aware that payday loans are high-risk loans that are often easily accessible, but often accompanied by high-interest rates and expectations of repayment in a short time, so should be considered with caution.