Payday Loans

Consider These Two Things When Considering Borrowing A Payday Loan By Phone

As the term suggests, a payday loan by phone is just like any other short-term cash advance; the only difference is that here everything gets finalized over phone. If you want a payday loan, all you have to do is just to give a phone call to the lender and your loan request can get approved within a matter of just a few minutes. Another growing trend is that many payday lending companies these days call their ‘target consumers’ themselves and ask if they are need a quick loan. It is very important for you to keep in mind that both the processes can be very risky; the later, in particular, is very much likely to be a scam. In order to protect yourself against possible scams in this regard, you must keep in mind the following things.

The Absence Of A Written Contract

When you apply for a payday loan by phone, you do not have to go through any paperwork. No written loan contract is prepared. The process goes like this – when you give a call to the lender or they give a call to you, you are asked to fax some documents, such as a void check, the most recent bank statement and your pay stubs. The basic eligibility criteria usually remain the same. In order to be eligible to borrow this short-term cash advance, you must have a decent employment history and your monthly income must not be less than $1000. However, some lenders may even agree to offer you a loan even if your salary is less than $1000 per month. The point here is that the lenders do not provide you any written contract, which gives them enough room to charge you unfairly. For example, they may verbally promise you that they can offer you up to $800 of loan and that they only charge a very nominal fee, which is around $60. This may sound attractive, but the hidden catch here is that they charge this $60 of fee on every $100 they lend to you. If you are borrowing $800, you will have to repay $480 just in terms of fee, which means you will have to repay 1280 in aggregate total. Besides that, since there is no written contract, you will also be not very clear about other terms and conditions, such as what will happen if you fail to repay in time. How much late penalty will be charged?

It is very important for you to keep in mind that whether it is a payday loan by phone or just any other type of cash advances, the laws have made it mandatory for all lenders to provide a written contract to the borrower, which must be duly signed and understood by both the parties. In fact, lenders are even legally obligated to include a disclosure box in the contract, where any hidden catches (such as * signs or ‘conditions apply’ must be explained). For example, if they claim to offer up to $800 as loan and charge ONLY $60 as fee, they must make it clear in the disclosure box that the fee will be charged on every $100 of loan issued to the borrower. Therefore, the absence of a written contract means the lenders are violating the laws. And, it does not make any sense to borrow from a lender who is involved in illegal practices.

Chances Of Identity Theft

When a lender calls you and offers a quick and easy payday loan by phone on attractive terms, they will ask you to provide you some crucial financial information about you. Some unscrupulous lenders may even ask you to provide your credit card number and other private bank account details, pretending that they require this information to make sure they are authorized to deduct the repayment money directly from your bank account on the due date. Most of these lenders do not accept post dated check, claiming that they do not want the borrowers to go through any trouble and that they are ‘experts’ on how to ensure the repayment and that it makes the entire process quick and simple.

If you are considering borrowing a payday loan by phone, it is very important for you to understand that there is a set procedure that you have to follow to authorize a lender to withdraw an agreed amount of money on a certain date from your bank account. You have to fill out an ECS form provided by the bank and sign it. It is undoubtedly a very stupid idea to provide your online banking passwords to the lender or provide your credit card details to them so that they can charge the money easily. Though this is common sense, it is unfortunate that many people are still falling prey to such trap, probably because they need cash urgently and are desperate to get it anyhow. Well, this is not how you should approach for a loan, especially a payday loan, which is often termed as ‘predatory lending program’ by financial experts and even by the FTC (Federal Trade Commission).

Overall, the final verdict must now be very clear – a payday loan by phone is nothing but a scam unless the lenders follow the federal and state laws thorough and provide a written loan contract with full disclosure about the terms and conditions of the loan, especially about the charges.


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