7 Warning Signs That a Website or a Lender is Fraudulent
You probably know by now that everything on the Internet is not always genuine. There are several precautions consumers must heed when making purchases online, especially if what you are obtaining is a payday loan. The payday loan industry is rife with scams and fraudulent lenders. Therefore, as a consumer, you must be on the lookout for insincere or dubious payday loan websites and lenders. The most popular form of obtaining payday loans is via applying online. Therefore, online scams are more likely than offline ones. With that in mind, refer to the following list for tricks and spurious claims scammers commonly deploy against unsuspecting consumers:
1. "No Credit Check"
Stay well clear of any payday lending sites that claim "no credit checks" on applicants. Most payday borrowers are in serious financial strain (hence the reason for applying for a payday loan). Under such circumstances, it may seem tempting to fall for a lure like "no credit check." All legitimate lenders run a credit check on all potential borrowers. Even if a credit report is not sourced from a major credit bureau, it still amounts to a credit check. If a lender or a website is claiming to offer loans without a credit check, they are either lying or running a scam.
2. "Instant Approval"
Online applications for payday loans can be processed in less than a day. That's quite fast compared to traditional loans. However, no proper website or lender can instantly approve a payday loan. That would require the lender to forgo reviewing documents and give money to anyone who asks. Legitimate lenders do not work like that. If a lender or a website approve you for a loan the moment you click the "submit application" button, then you are most likely the victim of a scam.
3. Guaranteeing Loans for Bad Credit
Majority of payday lenders, unlike traditional lenders, do not look overlook borrowers with low or bad credit. This is a fact that most lenders and payday loan websites love to overemphasize. Some websites may claim to guarantee loans for borrowers with bad credit. Don't believe such claims. In the lending industry, nothing is guaranteed. Lenders quite simply will consider your application even with bad credit, but there's nothing guaranteeing approval of such an application. If a lender or a site claims such, they are probably not legitimate.
4. Websites Claiming to Approve Loans
Legitimate lenders, by state and federal law, must be licensed to provide loans. Some websites do have lawful licenses to lend money directly, others not so. Therefore, information on a payday loan website must clearly state who the lender is. If a website claims "we will approve your loan," then the website must be licensed to provide loans. If the same website that claims to approve loans on some other instance also claims to connect you with lenders, then you can be assured that the loans are offered by a third party. You must be sure about where the loans come from before handing out your personal information.
5. Offering "Flexible" Payment Options
This is how payday loans work: a lender approves you for a loan, you write a post-dated check to the lender for loaned amount plus interest and fees, come your next payday, the lender cashes the check. There's no flexibility allowed in this plan. If a website or a lender claims to be "flexible" regarding repayment, they are scamming you. For example, a lender for a payday loan offers a four-week payment plan for a borrower. Say the borrower owes $100 plus $10 as interest and fees. The lender for the flexible payment plan then begins making weekly withdrawals for $20 plus $10 each time. Obviously, the borrower will be paying more as "interest and fees" than indicated in the beginning.
6. Offering the "Lowest Rates"
The interest rates and fees charged for payday loans depend on the preference of lenders. As there are no standard rates, it's quite impossible to calculate a "lowest rate". Do not fall for claims like this and be skeptical about websites or lenders that assert such things.
7. "No Bank Account Needed"
Obviously, you should worry about how the lender is going to send you the funds for the loan without a bank account. Websites or lenders claiming to offer loans for borrowers without bank accounts are only trying to obtain your sensitive personal information such as social security number, birthday and address. Do not engage with such websites or lenders, and if possible, report them to the authorities.
For more information on financial fraud and loan scams, please refer to the official website of the Federal Trade Commission.