27Mar/15

How to Protect yourself from a Payday Loan Scam

So, you need cash in a hurry? For many, this means one thing: a payday loan.

Before you make this decision, there are a couple things you need to do. First and foremost, consider your alternative options. You may find there is a better, more affordable way to get your hands on the money you need.

Secondly, you should become familiar with the many payday loan scams that are out there. If you aren’t careful, what may not be the best idea in the first place could soon turn worse. For example, you could open yourself up to identity theft.

Here are three things you can do to protect yourself from a payday loan scam:

  1. Check to see if the lender has a license. If a payday loan service doesn’t have a license, run the other way. Companies without a license don’t have to comply with state laws, meaning they can do pretty much whatever they want.
  2. Search for hidden fees. It goes without saying that a payday loan can be very expensive. But guess what? You may end up spending even more money if you aren’t aware of hidden fees.
  3. Don’t put out money upfront. Scammers often times ask for money upfront, such as to cover processing fees. This is one of the top signs of a scam. If somebody asks for money before they can lend you money, they are up to no good.

These are just three of the many things you can do to protect yourself from a payday loan scam. Of course, you have another option: avoid this type of loan altogether. Not only will this help you avoid a scam, but it will likely improve your financial situation. There are other ways to get the money you need.

13Feb/15

Why are Payday Loans so Appealing?

Despite the fact that most people are familiar with the drawbacks of payday loans, the industry continues to grow.

According to this resource, there are approximately 23,000 payday loan stores in the United States.

Despite the drawbacks, there are many reasons people continue to flock to payday loans. These include:

  • Easy to apply and qualify. This is nothing like a bank loan. Instead, you can apply for a payday loan and have the money within 24 hours. This simplicity attracts many people.
  • As a short-term loan, you have the opportunity to pay the money back as soon as your next paycheck arrives. Unfortunately, many people neglect to do so, thus getting hit with an extremely high interest charge.
  • Easy to find. As noted above, there are more than 20,000 payday loan stores in the United States alone. No matter where you live, you won’t have to look far to find a few stores that are more than willing to do business with you.

As tempting as it may be to apply for a payday loan, don’t let the perceived benefits outweigh the drawbacks.

You must understand that these loans have a high rate of interest. Furthermore, there are many fees that will take money out of your pocket. And if all that isn’t enough, consider this: the terms and conditions always favor the lender, not the borrower.

Payday lenders do their best to appeal to a large audience. This is how they get more business and make more money.

As a consumer, you should realize that the benefits of a payday loan will never outweigh the drawbacks.

16Jan/15

Payday Loans: What are the Drawbacks?

With the popularity of payday loans seemingly on the rise, there are bound to be people who are on the fence regarding this financial decision.

The primary benefit of a payday loan is simple: you can take a cash advance against your next paycheck, receiving the funds within 24 hours (most of the time).

While this sounds like a good thing, you don’t want to jump the gun before you take a strong look at the drawbacks. Here is what you need to know:

  1. High interest rate. Did you know that some payday loan lenders charge interest at a rate of 100 percent or more? If you don’t have a bullet proof method for repaying the money before the interest kicks in, you could find yourself digging a deep hole.
  2. Fees, fees, and more fees. In addition to interest charges, payday lenders make money by assessing a variety of fees, some of which can be quite costly. For example, if you neglect to pay back the loan on time, you could get slapped with a charge of $10 to $20 (on average) for every $100 borrowed.
  3. Fine print. Simply put, payday loans favor the lender. If you don’t read the fine print, there is a good chance you could agree to something that isn’t in your best interest. Once you read the fine print, such as the terms and conditions, it is likely that you will run the other way.

Final note: the collection practices of some payday lenders are anything but ethical. In fact, it can be downright scary. If you owe one of these lenders money, especially a company with a bad reputation, don’t be surprised if they make calls to your employers and family members. Furthermore, some take up the practice of making personal threats.

These are just a few of the many potential drawbacks associated with a payday loan. The idea of fast cash may be intriguing, but you could end up worse off in the long run. Is that a risk you are willing to take?

12Feb/14

Loan Shark Alternatives – Options to Consider

Are you under the impression that taking a loan from a loan shark is your only option? If so, you need to stop dead in your tracks and reconsider where you stand. As you look into other options, you will soon find that relying on a “predatory lender” is a poor decision that could make your financial situation worse in the near term.

In short, a loan shark specializes in offering short term, unsecured loans at a high rate of interest. To spot one of these lenders, look for the following signs:

  • Not required to fill out a loan application
  • Unable to answer your questions
  • Extremely high rate of interest

Don’t let your need for money cloud your judgment. If you are uncomfortable with what a lender is offering, it is time to move on and consider another option.

Here are three of the best alternatives to loan sharks:

1. Turn to friends and family. There is no denying the risks associated with borrowing money from friends and/or family, however, this is a much better option than doing business with a loan shark.

When you take money from a family member, for instance, you don’t have to worry about unfair terms. As long as you know you will pay the money back as promised, this is an excellent idea.

2. Dip into your emergency fund. While there are times when taking a loan is better than using all your cash, this is not the case if you are forced into dealing with a loan shark. If you have an emergency fund and you are faced with a situation in which you need cash, this is the best place to start.

3. Credit cards. Despite the fact that using credit cards can become habit, there are benefits of this when compared to a loan shark:

  • Even if the interest rate is high, it is not likely to be as high as what a loan shark would charge
  • You are dealing with a reputable company
  • You can make the minimum monthly payment without any concerns of retaliation or your debt growing without your permission

These are three of the best loan shark alternatives. Which option is right for you?