Are you at Risk of the Payday 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