Payday loans are becoming a lucrative business especially in places where the workforce is rising and cities are performing well economically. Payday loans provide and offer short-term cash to borrowers who can use it for medical emergencies, time-sensitive purchases, or even urgent expenses such as household and auto repairs, utilities, etc.
But along with a booming business comes with a bad side. There are people and businesses who take advantage of the booming industry and defraud people for their money. It is a bit challenging to eliminate these fraudsters completely. Knowing and being aware of their scams can help you eliminate the growing modus and keep legitimate and licensed lenders.
- Payday loan Kiting
This payday loan fraud is often done by the borrower against two or several lenders. Because payday loans do not involve credit scoring and review, a lender may simultaneously take on two loans from a different lender. The second loan being higher in amount is then used to pay the first lender where the balance is pocketed by the borrower. The cycle continues until the loan becomes high and the borrower suddenly disappears.
- Information theft
One of the payday loans fraud that is rampant nowadays is information theft. A payday lender through online or a representative request prospective borrowers’ information by filling out the application form. From this point, the posing lender uses the acquired information to make other loans from legit banks and financial institution. One great way to deter from this fraudulent activity is making sure that the lender has an existing physical address which you can visit to fill out an application form.
- Hidden fees and high interest
Payday loans are quite straightforward and don’t really require any complication in the loan agreement. It is the kind of loan where the i-give-you-money-and-you-pay-next-month type of loan. Of course with added interest rates. But some lenders, especially those who have not accredited overcharge interest rates and apply high fees. This is the reason why borrowers often end up paying too much for a payday loan. Payday loans are effective means of managing your expenditures if you scrutinize the legitimacy of the lender you approach.