How to Avoid Payday Loan Scams

7 min read
09 September 2022

All of us experience emergencies where we need cash as soon as possible. We’d sometimes borrow from friends, families, relatives, or co-workers, but they don’t have extra money too, or perhaps you chose not to because of some reasons.

When you need a quick loan, a payday loan might be your saviour. A payday loan is a type of loan that you need to repay on your next paycheck, plus the interest rate.

Unfortunately, many lending companies claim to be legitimate but only to find out they’re not, and the last thing you know is that they already took the processing fee and left you with nothing.

Since you need the funds, it’s best to avoid payday loan scams as they leave emotional and financial implications in your life. Loan scams are increasing, but that doesn’t mean that all lending companies are. The best way to identify whether they are legit or not is to spot the fake ones.

In this article, we’ll discuss how you can avoid being scammed on payday loans.

Ways to Avoid Payday Loan Scams

A 50-pound payday loan can save your day; it’s fast and enough for your daily needs until your next paycheck. However, when borrowing money from lending companies, whether it is a big or small amount, you need to be cautious about being scammed. So, when looking for a payday loan, here are things you need to look out for and avoid to ensure you borrow money from legitimate lenders.

Don’t Trust an Unexpected Offer

It would be nice when lenders can sense whether you need money or not. They’d call you whenever you need emergency funds. However, it’s not that simple. When they contact you, offering a loan out of the blue, never trust it.

Legitimate lending companies don’t contact potential borrowers directly. Instead, they advertise their offer through billboards, posters, and a lot more.

People who accept offers from “lenders” who promise cash assistance end up becoming a victim. Loan scammers usually contact their victims thru text, email, or phone calls, in rare cases, they would even approach you on the streets or will show up right on your doorstep.

If you receive these things, ignore them or inform the authorities.

Think of the Offer as Too Good to Be True

Whenever you are looking for a lender, always ask yourself whether the offer is too good to be true.

Loan scammers tend to offer promotions that’ll get your attention. For instance, they’ll say that they can grant you a low-interest rate, or perhaps it’s payable for many months.

On the other hand, many legitimate lending companies offer and grant loans to people who have a bad credit history or who have no records at all. However, it’s unlikely that they’ll provide extremely low-interest rates in the short term.

It’s highly advisable to compare loans from major providers to check how much the standard rates are. Don’t assume that if it offers a high-interest rate, it’s safe to deal with that company. Instead, look for other signs that’ll show the legitimacy of the business.

Be Cautious About Language Tricks

Fraudsters use language tricks to boost their credibility and make people trust them. They’ll gather information from various sources and use them to make them sound legit.

These people are also professionals, as they know how to switch from a very engaging, aggressive approach, to a mild and empathetic tone of voice. When they sense that you are already interested in the offer, even for the slightest bit, they’d continue persuading you.

Legitimate loan providers will never try to rush you. Instead, they’d wait for you to decide until you’re already sure about it. They’d also give you a number to call them back once you’ve decided to borrow money from them. Take note that the number they’d give you is the same one as publicly advertised.

Always Check the FCA Register

Lenders and companies offering loans to people have to register their businesses to FCA. This regulation started in 2014. If you see that a loan firm is present in the FCA register, they are legitimate.

When you check the register, find out their contact details and their reference numbers. You also need to check their status, whether they are already approved, denied, or authorized.

Confirming whether they are covered by the Financial Services Compensation Scheme or the Financial Ombudsman Office is also necessary. Don’t forget to check the type of services they are authorized to do.

After checking the FCA, you need to view their website and check for any discrepancies. Ensure that the registration number is viewable and they have a contact page. Of course, the texts on the website should sound professional.

You can also check the company name plus the word “scam” on the internet to find out whether they have scammed people.

Be Careful of Paying Upfront

The most obvious sign of a scam is asking you to pay a certain amount upfront without any written documentation.

A lender cannot charge you any upfront fee. If they say that it’s for the insurance or tell you that it’s needed to activate the loan without any paperwork, it’s a scam.

Similarly, credit brokers are not allowed to charge an upfront fee unless it’s properly documented, and both parties have agreed to it, usually with your signature on it.

The best thing to do in this situation is to not pay for something that has no transparency and paperwork. It’s easy to say that they need it for the insurance, but once you paid for it, you’ve already fallen into a trap.

Stay Alert: Don’t Get Fooled By These Fraudsters

When you need emergency cash, it’s easy to make bad decisions that can leave negative impacts on your life. There are a lot of fraud cases out there; fraudsters don’t mind the age of their victims, so stay alert.

You can check the website, the tone of their voice, or whether they are putting pressure on you. Check the FCA, and other signs that could be a factor in them being a scam.

So, take your time, and don’t rush things. Instead, follow the tips above to avoid payday loan scams.

In case you have found a mistake in the text, please send a message to the author by selecting the mistake and pressing Ctrl-Enter.
George Relish 0
George Relish is the Editorial Director at Quidable. Before starting his work at Quidable, he spent five years in banking. He is passionate about reading scienc...
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