No, you should not be paying upfront for a payday loan.
The idea that you have to pay money upfront to receive your payday loan is one that is often used by scammers.
If a lender tells you to pay a sum upfront to receive your full payday loan then they are not a legitimate lender.
If you think that you are being scammed by an illegitimate lender or are being subjected to predatory lending practices, you should report the incident to the FTC.
Should I Pay Upfront For a Payday Loan?
If a ‘lender’ is asking you to send money upfront so that you can receive your loan, then it is likely that you are being scammed.
Payday loan scams are a big issue, and some schemes are scams or types of predatory lending that need to be taken seriously.
The payday loan industry, just like many other financial industries, has some scammers who prey on people who are desperate for cash.
The majority of payday loan scams work by tricking borrowers into providing sensitive information or sending money directly to a scammer.
Upfront Fees
A scammer posing as a legitimate lender might claim they will guarantee a payday loan if you pay them a fee upfront beforehand.
It is common for such scam companies to ask for funds provided via money order, gift cards or wire transfer because these are all methods where it is almost impossible to get your money back.
After funds have been sent over, the scam company will disappear without providing you with the payday loan as promised.
No legitimate payday loan lender will request payment upfront, so never put your trust in a company asking for this.
Are There Other Types of Payday Loan Scams?
Yes, sadly there are many scammers out there who use a variety of methods to try and take money from vulnerable people looking to borrow money.
Online Forms
Some payday loan scams work by asking you to complete a fake online form.
These will ask for all of your personal details, as well as your bank details.
On completion, you won’t receive the payday loan as planned, but the scammer will sign you up to a membership scheme that takes funds directly from your bank account.
Guaranteed Loan Approval
If you come across a payday lender who offers you guaranteed approval for their loans, it is likely to be a scam.
All responsible and legitimate lenders must follow regulations, and they are not allowed to guarantee an application will be approved.
Every lender is obliged to carry out comprehensive credit checks and assess your financial situation before deciding if they can lend to you.
At Dime Alley, we do not offer guaranteed approval, but we do have a variety of lenders who will provide loans to borrowers with all different credit histories – good and bad.
What Should I Do If I Have Been a Victim of a Payday Loan Scam?
Sadly, it is quite common to fall victim to a payday loan or other type of financial scam.
One Better Business Bureau report lists a few different scenarios that make up more 3,000 payday lender-related scam complaints received since 2019. Consumers have collectively lost millions to these scams, with the median amount lost per person in 2022 reaching $1,000.
The truth is that getting your money back may be extremely tricky, but there are some things you can do to protect yourself and other borrowers in future.
Inform Your Bank
The first thing you should do if you have fallen victim to a payday loan scam is let your bank know that your details may have been compromised.
If you provided card details to a scammer, they can block your bank card and prevent it from being used. If you provided bank account details, they could keep an eye out for unusual activity, such as new direct debits.
Report The Scam
If you used a payday loan lender not authorised by the FCA, you could report them to be investigated.
Go to the FCA website and fill in an unauthorised firm reporting form which will ask for details about the company in question. The FCA also advises victims of scams to report the lender to Action Fraud.
Inform Others
While it can be frustrating knowing you are unlikely to get your money back, you can do your bit to protect future borrowers from the same scam.
Leave a review online about your experience with the company and share details of the company on social media. This can help warn others to not fall foul to the scammers further down the road.