Latest posts by George Paunov (see all)
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How to identify online payday loan scams
Payday loans online are loans with very high risk for the borrower. Since payday loan practices are illegal in many states and are considered predatory in nature, many lenders set up shop online to get around that. This means the borrower will often deal with lenders who don’t meet the legal criteria applied to financial services institutions. The borrower needs to be very careful.
- Avoid loans not requiring faxes
Faxless loans are basically loan offers with no actual paper trail. They are popular among payday loan borrowers who want to make sure that no agency or other people find out about his loan. Payday loans are, or at least should be a last resort option. If your employer or mortgage company finds out about the issue in hand, you may be faced with uncomfortable questioning. Attractive as it is to have an anonymous loan, this option often means that the lender isn’t really considering if he should or shouldn’t extend the loan. This means it’s more likely that they’ll give the borrowers responsibly high limits of credit.
- Look for credit checks
There are people who intentionally look for substandard lenders as most of these lenders don’t require lengthy background or credit checks. This makes them a good option for borrowers with bad credit history. If the borrower wants to know if he’s dealing with a legitimate lender, he should expect at least a simple background check, credit report or income verification.
Online payday loan lenders tend to give loans to people who aren’t creditworthy.
However, one thing they should require is for the borrower to be employed before issuing the loan. For the lender’s also important to be sure that the borrower is not using a false identity for the loan. The identity of the borrower can be verified with a credit check.
- Read all the details
Before taking out a quick cash loan online, the borrower should read the fine print carefully. However, not many follow this advice with a payday loan. When taking out online loans with a monthly payment, the borrower has to know what are the loan modifications and late payment charges. All these are detailed in the fine print.
Hidden fees can bring real trouble as they add hundreds of dollars to the borrower’s repayments. The borrower can find himself stuck in a cycle of debt. The best online loan lenders will apply high rates for any cash advance, but it is not likely that they’ll charge inordinate fees or provide no grace period.
- Find contact details
If the borrower is considering submitting personal information over the internet to online loan companies, it’s important to know the contact details of the company he’s about to work with. Always look for a “contact us” button to be able to locate a physical address and phone number. Call the phone number to get an assurance that the company is actually in operation. The next step is to look up the address in the Yellow Pages or other sources.
How to report a scam
You can report online loan scams to the Department of Consumer Affairs in your state. You can also report online loan companies to the federal Department of Consumer Affairs. However, it makes the most sense to have the state department consider the violation since lending laws are set at the state level. You should submit your report in writing and keep a copy of it for your personal record. You should have a response from the department verifying receipt of your report and an on-going investigation within a few weeks.