Beware of predatory lenders
Both auto title loans and installment loans are marketed to customers with bad credit. These loans tend to come with extremely high interest rates and have fees that can land you into a debt trap. While this is commonplace, a predatory lender has a few more tricks that can deceive you. Here are some things to look out for:
- Guaranteed approval. There’s no such thing as guaranteed approval. Lenders who advertise this are often trying to make a quick buck off interest and don’t care about your ability to repay.
- Pressure to borrow more than you need. You should only take out a loan for the amount you need to get through whatever financial hardship you’re having. Lenders who push you to take out more money aren’t looking out for your interests.
- Loan renewal options. You may think that being able to rollover your loan if you can’t pay it back is a good thing, but this is an easy way for you to land in a debt cycle where you’re constantly renewing your loan or taking out more loans to pay for the first one.
- Upfront fees or payments. Don’t borrow from a lender that requires you to pay an upfront fee. This is often a scam. Application and origination fees are usually deducted from your loan funds before being given to you, not requested before you receive your loan.
- The lender approached you. If you’re getting flooded with texts and robo-calls asking you if you want to take out a loan — run. These could be a scam. Legitimate lenders will at most send you a letter or two in the mail. Anything more persistent should raise a red flag.
- Nontraditional payments. Lenders either require you to leave a postdated check or allow an ACH transfer from your bank account. If a lender is asking you to pay in gift cards, cash or another untraceable method, you might be dealing with a scam.