While most financial service providers are well-respected businesses that are known to be reliable and trustworthy, as with any other industry, for every 1,000 good companies out there, there’s at least one that doesn’t have your best interest at heart. Unfortunately, there are several lenders out there that have made sneaky moves in an effort to get their hands on your hard-earned dollars. With that said, we’ve listed four red flags you should watch for to ensure that you’re not the victim of a scam.
#1 – Nonrefundable Fees Paid in Advance
This flag is most likely seen from shoddy credit card lenders that can only appeal to those who have a hard time getting a loan. Nonetheless, they offer credit cards that they guarantee everyone will be approved for, grabbing the attention of those with poor credit who need a loan. In the fine print, however, they state that there is an annual fee charged in advance, a credit check fee, a credit line fee, a credit card printing fee and more. By the time you get to the bottom of the list of fees, $494 of your $500 credit line has already been used. The sad part about this is that there are people who apply without reading the terms, essentially agreeing to this madness!
#2 – It’s a High-Pressure Loan
Pressure sales are nothing new, especially in finance. After all, much of the stock market, even today, runs on pressure sales and boiler rooms! Nonetheless, you should never get involved in a loan if you feel as though you’re being pressured in any way to make a decision. The reality is that good lenders that are concerned for your better interest want you to take your time to think. After all, they wouldn’t want you borrowing money that you can’t afford to pay back. So, if you find yourself in a position where you “have to make a decision before you end the call,” the decision should be an immediate “no”!
#3 – The Loan Has an Incredibly High Interest Rate
If you’re looking for any form of unsecured loan, chances are that the interest rate is going to be less than desirable. However, that doesn’t mean you have to pay 499% either! There are several predator lending companies that make consumers believe there are no other options because of their past or current level of financial stability. The reality is that if you do your research, you’ll quickly see that’s not the case at all! Don’t get suckered into paying more than you have to.
#4 – The Loan Company Attempts to Hide Details in Fine Print
For those of you who make sure to read everything you sign, this might be hard to imagine, but the majority of consumers don’t read terms and conditions before signing on the dotted line. Instead, they sign, and if they do decide to read the terms, they do that later! Unfortunately, this is how most predatory lending companies latch onto their victims. They hide annual fees, high interest rates and other fees behind legal jargon and fine print. Before signing up for a loan, make sure you read the terms, including the fine print. If there’s something you don’t understand, look it up! The process may seem tedious, but doing so will help protect you from predatory lending practices.
While there are tons of scams out there, there are far more legitimate lenders who truly do have your best interest at heart. You shouldn’t be afraid to get a loan, but you should take your time to do your due diligence to make sure you don’t become a predator’s next victim. The good news is that by simply reading the fine print and demanding general courtesy from your lender, you can ensure you’re never a victim!
Joshua Rodriguez is a guest contributor for LoanNow and is the owner and founder of CNA Finance.