A cash advance loan is a small, short-term, high-interest loan that is offered in anticipation of receiving a future lump sum of cash or payment. Although a cash advance may be made in anticipation of future legal winnings, insurance awards, real estate proceeds, pensions, inheritances or alimony, the most common cash advance loans are for an anticipated tax refund or payday loans. Do you know how to recognize and avoid a cash advance loan scam?
A cash advance loan is a small, short-term, high-interest loan that is offered in anticipation of receiving a future lump sum of cash or payment.
Although a cash advance may be made in anticipation of future legal winnings, insurance awards, real estate proceeds, pensions, inheritances or alimony, the most common cash advance loans are for an anticipated tax refund or payday loans.
The whole process of applying and getting the loan usually only takes a day or so if you fill out the application form without any mistakes and provide all the information and documents to the lender that they require. When you apply for a cash advance loan, it can be done in person, or online. Most people prefer to apply online for privacy reasons.
When you are using the online option, you are required to fill in an application and then submit it. You are usually also required to fax some documents to the lender. These documents may include proof of identification, bank statements, latest salary slip and a personal stamped check.
Most of the applications are approved immediately and the processing would usually take about 24 hours.
The most common cash advance loan is a payday loan. They are usually small [usually less than $500], short-term, high-rate loans that have a variety of names including cash advance loans, payday loans, post-dated check loans, check advance loans, or deferred deposit check loans.
The process is that a borrower writes a personal check to the lender for the amount that they wish to borrow plus a fee to cover the borrowing. Alternatively, the borrower gives the lender authorization of automatic clearance of the loan amount from their bank account.
The lender holds the authorization for auto debit, usually until the next payday. The fee for a payday check is usually a percentage of the amount borrowed.
If the loan is extended, the fees will apply for each extension. A payday loan secured by a personal check is very expensive credit. If you borrowed $200 for 2 weeks the fee may be $30. On an annual basis, the interest rate is 390%! A common interest rate is 15% which is an APR of 459%.
Under the federal Truth in Lending Act, the cost of payday loans must be disclosed. Among other information, you must receive, in writing:
* The finance charge (a dollar amount) * The annual percentage rate (APR) which is the cost of credit on a yearly basis
A payday loan scam usually gets its name because the lender does not disclose the APR or the finance charges clearly, charges extra fees for an application, decides an unrealistic repayment timeframe, or requests an application fee with no intention of providing a loan [online].
There are a lot of loan websites that exist only to get your personal information [phishing] and then use it to get credit cards to commit fraud, drain your bank account, or on-sell it to the highest bidder.
How to Recognize Payday Loan Scams
* A lender that is not interested in your credit history, yet asks for some personal information such as your Social Security number or bank account number [and potentially misuse it] * Fees that are not disclosed clearly or hidden charges * Lenders who ask you to wire money * Be careful with lenders who are not registered in your state. To check registration, call your state Attorney General’s office or your state’s Department of Banking or Financial Regulation.
How to Avoid Payday Loan Scams
* Each state in the US has different payday loan laws. In many US states, payday loans are illegal. Know the specific laws in your state * Only use a registered company * Check the terms and conditions before agreeing to them * Check the repayment process * Check the terms and conditions for extending the repayment time * Don’t ever give out personal information or agree to a loan over the phone or via the Internet
Steve Nickson makes it easy to avoid being scammed. Find out how scams work, how to recognize them, and the steps to take to avoid becoming a victim by visiting href=http://www.watchforscams.com>Watch for Scams
