5 Ways to Spot a Payday Loan Scam
The payday loan industry is certainly no stranger to scandal. Short-term lenders are constantly under fire for their interest rates, borrowing terms, and collections practices. A small minority of providers are guilty of something even more odious—scamming unsuspecting borrowers. Payday loan scams are particularly common on the Internet, which is not surprising considering anyone can set up a website claiming to be a provider. To avoid falling prey to one of these scams, you need to be aware of their telltale signs. Read on for a list of five classic signs of a scam.
- The provider wants money up front. Con artists lure borrowers to their sites by promising them obscenely large approved amounts. They tell the borrower that a small deposit or down payment is required to qualify, and they ask for money up front, sometimes hundreds of dollars. A reputable lender will never ask you for money in advance, so don’t trust companies that do.
- The loan company’s site is not secured. The best lenders will have icons on their home page indicating that their site has been verified as secure by an objective party. One of the most common icons is the VeriSign Secured checkmark logo, which means the lender has obtained a VeriSign SSL certificate to improve security. The McAfee shield is also a good sign; it means that the provider’s site is secure enough to stop over 99.9% of hacker crime.
- The lender’s promises seem too good to be true. If you find a site where the company makes sensational promises that no one else is offering, it’s probably a scam. Lenders that promise massive payday loans and/or the instantaneous delivery of funds are probably scamming you or, at the very least, lying to you.
- Your loan agreement is missing key information. Before the transaction can proceed, your lender will have to provide you with loan documents that you will need to sign. Federal law requires providers to include the APR of the advance in bold on these papers. If this number is missing, the provider is violating the law and probably taking advantage of you as well. Also make sure your loan agreement tells you when the loan is due and how repayment works.
- The lender’s contact information is missing or fake. Your provider’s site should clearly indicate where the provider is physically located and how you can reach them. It’s a good idea to try to call the number listed on the site before you initiate the lending process. If the number is bad or no one picks up, you should find another payday company.