Payday Loan Scams

It's a trap!

Recently, more and more people have been turning to Payday Loans to get quick cash for an emergency.  As a result, more scams are popping up, and borrowers are experiencing the consequences.  If you do need to get payday loan, make sure you read all of the fine print so that you don't end up with a judgment or bad credit.

Some payday loan shops have been asking people to secure their loan with more than their paycheck; some have asked to use a car title or even a home's title as collateral.  If the borrower defaults on this loan (sometimes in as little as 2 weeks), the collateral becomes that of the lender.  Using your $10,000 car as collateral for a $500 loan is blasphemous.

The best way to avoid these scams is to just not use payday loans.  Have an emergency/savings fund for these circumstances as getting a payday loan just isn't worth it.

Payday Loans (aka Paycheck Advances)

A payday loan (or paycheck advance) is a short term loan that's designed to cover the borrower's expenses until the next payday.  Sometimes, this type of loan is also referred to as cash advances.  (Cash advances can also be taken against an existing line of credit like a credit card.)

Payday loans don't fall under as strict legislation like conventional secured loans (homes, cars) and unsecured loans.  It is common to have a payday loan have an APR of over 50%.  Therefore, it is imperative that the individual who takes out the payday loan pays it back as soon as possible to avoid extreme interest charges.

Paycheck garnishments are never fun.

If necessary, only use payday loans as a short term solution to a cash shortage problem.  People who run payday loan shops know that the business is very profitable.  Since you use your paycheck in the application process, a default on the payday loan can easily be taken to court, and a judgment will result in a garnishment of your wages.  A $200 loan could eventually turn into a couple thousand dollars if the process is dragged out long enough.  Also, your credit score will dip due to the default.