Are Personal Loans Bad? How to Avoid Scams & Payday Predators

In searching out your financial options, you may be rightly concerned about some of the fraudulent schemes that exist today. It’s important for a consumer to have all the information they need to make an informed decision for their financial welfare.

If you’re asking yourself “are personal loans bad?” as you explore your options, read ahead to discover how personal loans work and how they can help you.

How Personal Loans Work

To illustrate why the answer to the question “are personal loans bad?” is no, it’s important to begin with an understanding of how these types of loans work.

Personal loans involve borrowing money from a lender that is paid back by the customer in monthly payments. They’re typically paid over a span of two to five years and can offer much better rates than credit cards. Additionally, these loan types are usually unsecured, and you can typically use the money for whatever you need.

The right lender can help guide you through the personal loan application process as well as assist you in managing your personal loan.

Are Personal Loans Bad?

After discovering that payday loans are a risky endeavor, some consumers begin to ask themselves “are personal loans bad too?” With the right lender, personal loans —in fact, personal loans can have benefits for your finances.

Personal loans can afford a consumer a fast way to get the funds they need to support their financial goals, including debt consolidation. The flexibility of personal loans can allow more financial freedom and more autonomy in deciding how to use a loan. They can even afford you the possibility of improving your credit score.

Improving Credit Score

Knowing that the answer to the question “are personal loans bad” is a resounding no,  you can proceed to do more research on how personal loans work and what factors you should consider when applying for one.

Scams and Payday Predators

Scams

Scams can take on various forms to intimidate you into releasing personal information to criminal sources. Many times, scams involve calling victims and demanding immediate repayment under threat of severe punishment, such as arrest. They also threaten the victim with charges of illegal activities such as money laundering. 

 Scammers have been known to repeatedly call home phones and even work phones to harass and intimidate victims.

Payday Predators

While personal loans from a trustworthy lender can bolster your financial position, payday predators and loan repayment scams are a serious issue that can lead to financial harm. 

Payday predators target individuals by offering terms that put an extreme burden on the borrower, such as exorbitant interest rates. The terms and fees are often applied deceptively or even illegally. In fact, the Federal Trade Commission has sued payday loan companies in the past for predatory practices.

Additionally, payday predators don’t take appropriate steps to protect a borrower’s information, or they can act as a front to obtain personal information which is then used fraudulently.

Protect Yourself

As a consumer, it’s imperative to take every possible step to protect your information. To get started, consider the following: 

How to Avoid Scams and payday predators

 Tips to avoid scams

  • Avoid giving out your social security number or personal information over the phone unless you contacted the company directly yourself.
  • Avoid forms in e-mail messages that ask for personal information.
  • Keep the security on your computer up to date.
  • Be suspicious of any requests for personal information that are threatening or that demand immediate action.
  • Check your accounts frequently to ensure that no fraudulent transactions have been applied. 
  • Notify all of your creditors, including banks and credit cards, if you notice anything suspicious on one of your accounts.

Tips to avoid payday predators

  • Avoid payday lenders that are based in another country.
  • Avoid a prospective lender that requests money from you upfront prior to distributing a loan.
  • Avoid payday loan websites that do not have legitimate, working phone numbers or mailing addresses.
  • Avoid loan offers that seem too good to be true.
  • Read the fine print carefully.

Bottom Line

As you navigate your financial options, be cautious of scams and payday predators and be knowledgeable for how to avoid them. If you’re interested in enjoying the many benefits of a personal loan, seek out a reliable lender. The right lender and personal loan for your needs can help you achieve your financial goals.

Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.  The information contained herein is for general informational and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. The information or opinions contained herein should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service.

 

The information contained herein was prepared for general information and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. Eloan a Division of Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice. Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances.