Nowadays, payday loans are being offered in almost every corner of the city. It is becoming a lucrative business that lenders are reaching in to. It is very crucial that in cases you are considering to take on and apply a payday loan, you acquire it from licensed lenders such as banks and other financial institutions. There are even small lenders who acquire licenses from the government to operate as such. Applying for a payday loan from a licensed lender will eliminate the chances of lender fraud and scams that a borrower may fall victim to. Here are a few of the payday loan scams you may need to keep an eye on when getting a payday loan.
- Identity Theft
One of the most common scams that a borrower falls into is identity theft. The lender goes through the entire process of application and document acquisition (if needed). The borrowers identity is then used for other kinds of loans and even for other illegal practices.
- Payday Loan Theft
This usually happens when there is a middleman or a broker between the lender and the borrower. The middle man is the one who process and creates the applications and applies on behalf of the borrower. The broker then submits all applications and may even receive the cash who poses to the lender as the borrower. The borrower is then informed of a rejected status when the cash has already been received by the broker. To the borrower surprise, there is a loan under his or her name once the broker has already disappeared from the picture.
- Hidden Fees and High Rates
Unscrupulous lenders try to encourage a borrower to avail of a very good loan package deal. In such cases, especially when the borrower is falling short in cash, they become prey to these predatory actions. The lender includes hidden charges and applies high interest to loans that become a burden to the borrower. In certain cases, the borrower ends up refinancing the debt with another payday loan which only creates a bigger amount of amortization and interest payments. This is a good reason why it is necessary to transact with licensed lenders.