Should I Pay Upfront For a Loan?

Author · Modified on 16 October, 2023

No, you should not be paying any money upfront for a loan, whether it is from a payday lender or personal loan company. The process usually involves you applying for a loan and once approved, the funds are transferred to your bank account.

It is unlikely that the company is legitimate if they are saying that you are only approved once you transfer $50 or $100 because this may be a scam and if you have made the transfer, you will probably find that you will never hear from them again.

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.


Can a Loan Company Ask For Money Upfront?


No, this is not something that is common for personal, payday or unsecured lenders. 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.

You may receive a SMS or email with the promise of a loan being approved or funded once you have made an initial payment, but this should never be the case. With a typical loan, you should receive the entire sum upfront and then repay in one or multiple installments and this will be outlined to you beforehand in a loans agreement. Therefore, if someone is saying you have to pay something like $25, $50 or $100 upfront, this is likely to be a scam and should be avoided at all costs.

There are however some large financial products and loans that do require upfront fees, not always but in some cases. Certainly things like home equity loans or mortgages require you to pay a broker fee before the loan is completed – and this is common. But for smaller loans, beware any upfront fees because this is not typical.


payday loan upfront
A lender asking you to send money upfront is probably trying to scam you.


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 loans with 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 think that you have been scammed by a payday lender or a pretend one, you can submit a complaint to The Consumer Financial Protection Bureau. There is no guarantee that you will get your money back, but it will certainly help them build a case if there is an individual or team of scammers who are doing this on a larger scale or make them aware of any scams. Any evidence that you can provide in terms of names, email addresses, bank details and documents will only help them build a case against the individual and bring them to justice.


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.

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