Finder makes money from featured partners, but editorial opinions are our own. Advertiser Disclosure

Are payday loans a scam? What to watch out for

Watch out for these red flags when comparing short-term lenders.

If you’re desperately short on cash, you may be thinking about a payday loan. You may also have a lingering question on your mind: Are payday loans a scam?

Let’s take a look at why payday loans have a less-than-stellar reputation, as well as which scams you should watch out for. Finally, we’ll discuss how you can get a legitimate short term loan.

Are all payday loans scams?

Not all payday loans are scams — there are legitimate lenders that will extend credit to those in need.

However, payday loans can be extremely expensive, and this may be why they’ve acquired reputations for being scams. On average, you’ll pay $15 to $30 per $100 you borrow, which calculates out to at least a three-digit APR.

Payday loans are also notorious for trapping consumers in endless debt. Because these loans are so expensive, borrowers often have trouble paying them off, often causing them to take out more payday loans to pay off their debts.

All this said, there are payday loan schemes that really are scams. To protect yourself, you’ll want to know what to watch out for.

How do payday loan scams work?

Like many financial industries, the payday loan industry has scammers that prey on desperate people. Most scams revolve around consumers unwittingly giving out sensitive information or sending money to unscrupulous individuals.

Here are three payday loan scams and how to avoid them:

  • Upfront fee

    A company posing a lender will guarantee you a loan if you pay an upfront fee first. The company may ask for the money to be sent as a wire transfer, money order, gift card or some other form that’ll be hard for you to get back once sent. After the company receives the upfront fee, they’ll disappear without giving you the loan they promised.

    To avoid this scam, don’t give any money to a lender in order to get a loan. Legitimate lenders do not charge fees before you’re approved for a loan. Any one-time fees for establishing the loan should only be charged after you’re approved and have received your funds. Also, be wary of guaranteed offers. A legitimate lender cannot guarantee a loan without seeing your full application.

  • Payday loan collection

    In one common payday loan scam, someone will call you claiming to be a debt collector. They may threaten you with legal action or arrest if you don’t pay. The caller may also have your personal details — your bank account number, for instance, or even your Social Security number. Having this information doesn’t mean the call is legitimate. More likely, it means that someone else sold your information to a third party.

    Don’t give out any personal information over unsolicited calls, and don’t send money to anybody claiming to be a payday loan collector. If you do currently have a loan, call your lender directly to verify the terms of repayment.

  • Fake online form

    In some scams, you’re asked to fill out an online form to receive a payday loan. After you’ve entered your bank account information, the operators of the website won’t actually extend a loan to you. Instead, they’ll enroll you into some type of membership program that will take money from your bank account.

    To avoid falling prey to this type of scam, thoroughly vet any payday loan website you’re thinking about using. And read all of the fine print to make sure you understand it.

How to protect yourself from a payday loan scam

  • Compare multiple payday loan operators. It may be difficult to gauge the legitimacy of one payday loan website by itself, but you may be able to spot red flags when you look at multiple websites.
  • Look for information and reviews online. Negative information (or even the lack of information) online can point to a payday loan scam at work.
  • Be wary of unsolicited phone calls. Don’t accept a payday loan offer through the phone — there’s probably a better deal elsewhere. Additionally, there’s no way you can verify the legitimacy of the caller.
  • Understand the laws governing payday loans in your state. Many states heavily regulate the payday loan industry, and in a few states payday loans aren’t legal at all. Knowing the laws will help you gauge whether a payday loan operator is legitimate or simply trying to scam you.

In which states are payday loans legal?

Where to get a legitimate short term loan

If you’re set on taking out a payday loan, check with the Better Business Bureau to make sure the lender you’re considering is legitimate. Also contact the lender and ask for their physical address and phone number. If a lender is legitimate, they’ll freely give identifying information about themselves.

Here are some reputable lenders you can consider for a short term loan:

1 - 0 of 0
Name Product Filter Values Loan amount Turnaround time Requirements
Tidal Lending
Tidal Lending
$100 to $30,000
As Soon As Next Business Day
Regular source of income, Verifiable bank account, US citizen, Ages 18+
Chime SpotMe overdraft
Up to $200
$200 in qualifying direct deposits into a Chime checking account in the last 34 days
OppLoans Installment Loans
$500 to $4,000
1 business day
Direct deposit, Meet minimum income requirements, Live in eligible state
Comes with the option to change your due date so you won’t fall behind on repayments.
CashNetUSA Loan
Varies by state
As fast as same business day
Regular source of income, bank account, US citizen or permanent resident, age of majority in your state
Sign up for its discount program to get access to coupons and deals on everything from dining out to tax services.
Fast5kLoans Short-term Loans Connection Service
$100 to $35,000
As soon as the next business day
Regular source of income, Verifiable bank account, US citizen, Ages 18+
Get connected with multiple lenders you might qualify with — even if you have bad credit.
LendYou Short-term Loans
$100 to $2,500
Same business day to 1 business day
$1,000+ monthly income, direct deposit, US citizen or permanent resident, ages 18+
Get offers from potential lenders in minutes by filling out just one online form.

Compare up to 4 providers

Payday loan alternatives

Even if you need cash right away, a payday loan isn’t your only option. There are other types of loans that can help you with your cash shortfall. (For example, a personal loan can be a great choice, as it typically come with reasonable interest rates.)

Because payday loans can be very expensive, it can be a good idea to consider alternatives. You could ask friends or family for help, get a loan from a credit union or even negotiate bills with your creditors.
8 payday loan alternatives to consider

Look at these factors before taking out a loan

  • The fine print. Before taking out any loan, you’ll need to agree to a lender’s terms. Take your time and read the fine print before agreeing to anything. If there’s anything you don’t understand or find objectionable, don’t be afraid to ask questions or look elsewhere for a loan.
  • The interest rate. A reputable lender will tell you a loan’s interest rate up front. Once you know the rate, you can calculate how much you’ll pay in interest. Consider the future and think about your ability to repay the loan.
  • Fees. Make sure you understand any fees you’ll pay to take out a loan. Some lenders add hidden fees to their loans, so confirm the total amount you’ll pay before you agree to anything. For example, some payday loans may come with fees for loading funds onto prepaid debit cards.

What to do if you’ve been scammed

Sometimes it can be hard to tell a scam from the real thing. If you think you’ve been scammed, there are steps you can take to protect your personal information and your money from being stolen.

  • Contact the police. Your police should have a non-emergency number that you can call when you know you’ve been scammed. File a police report in order to legitimize the situation. Your bank and credit bureaus will want to see that you’ve taken this action, so it’s an important first step.
  • Contact your bank. Since even legit lenders will ask for your bank account information, you may have given this to a scammer. Even if they haven’t stolen anything from your account yet, putting your bank on alert will help them track your account for any unusual activity.
  • Contact the Social Security Administration (SSA). If you’ve given out your Social Security number to a scam artist, you’ll need to contact the SSA as soon as possible to prevent identity theft.
  • Contact the top three credit bureaus. They can put a freeze on your credit report in case of any suspicious queries pop up. This will help prevent future damage from scammers trying to use your credit to buy expensive items.
  • File a complaint with the Federal Trade Commission (FTC). This can help the FTC and other agencies track fraudulent behavior and prevent other scams in the future. Visit its complaints page online to get started.
  • File a complaint with your State Attorney General. Your State Attorney General will note the scam and attempt to make a case against the perpetrators. If you’ve been scammed, reporting it could help find who did it and have them answer to the law.

These steps might not be able to get you your money back, but they will make a dent in the ability for scam artists to function in the future while helping you protect your identity. The best way to prevent a scam is to know what one looks like, so familiarize yourself with this page in order to know what to avoid in the future.

The bottom line

There are reputable payday loan lenders, but there are also many disreputable companies in the industry as well. Be sure to do your research and thoroughly compare your options for a short term loan before applying.

Frequently asked questions

More guides on Finder

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

8 Responses

  1. Default Gravatar
    ValerieApril 25, 2019

    Do consumer needs pay day loan really exist i really dnt think they do

    • Default Gravatar
      nikkiangcoApril 26, 2019

      Hi Valerie,

      Thanks for getting in touch!

      There are a several reasons why consumers need payday loans however, it’s usually for covering immediate cash needs like paying bills, until you get your next paycheck.

      Payday loans come with high rates and fees though, which can trap consumers in a cycle of debt so alternative loan options should be considered before opting for a short-term loan.

      Hope this helps!


  2. Default Gravatar
    GloriaSeptember 6, 2018

    Is Speedy Cash licensed to do business in the state of VA?

    • Avatarfinder Customer Care
      JhezSeptember 7, 2018Staff

      Hello Gloria,

      Thank you for your comment.

      Upon checking, yes, Speedy cash is licensed to operate in VA.

      Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.


  3. Default Gravatar
    MicheleApril 11, 2018

    I have taken an internet payday loan out on the past. I have repaid most of them off according to the contract and some I had to settle the lender, but paid eventually. My family, my work and myself all receive harassing phone calls from a 3rd party. I’m sure my information has been sold. It’s very embarrassing, the cycle seems to be never ending. How do I stop this?

    • Avatarfinder Customer Care
      JoshuaApril 12, 2018Staff

      Hi Michele,

      Thanks for getting in touch with finder.

      I’m sorry to hear about your situation, Michele.

      If you have already paid all your outstanding debt, then there’s no reason for the lender to continue bothering you. Usually, if a borrower isn’t able to pay, they are endorsed to a collection agency which might explain why you are getting a phone call from a 3rd party. Here’s what could happen if you don’t pay back your payday loan.

      The best way for you to stop people from harassing you is to pay off your balance. Now, you mentioned you already paid them. In this case, you need to directly get in touch with your lender and inform them that you already paid your dues. They should be able to fix the problem.

      Each state and city has its own laws regarding payday loans. If you’re being harassed by a collection agency, your most important step is to become informed about your rights and obligations under the law, including what agencies can and can’t do when trying to collect the debt.

      When dealing with a collection agency, know that they’re trying to scare you into paying whatever you can. Instead, stand firm when dealing with these aggressive collectors.

      I hope this helps. Should you have further questions, please don’t hesitate to reach out again.

      Have a wonderful day!


  4. Default Gravatar
    MarguretteAugust 19, 2017

    I was excepted for a loan this loan company put x amount of dollars in my account then wanted me to get some cards with that money to get my loan I refused to do it this amount is still in my account what do i do with it?

    • Avatarfinder Customer Care
      MariaAugust 19, 2017Staff

      Hi Margurette,

      Thank you for your inquiry.

      If the check or the lender seems suspicious to you, you can contact your bank and ask for their assistance in returning the money to the depositor’s account.

      You can also ask your bank for information about the sender account to help you investigate further if the account is genuine and to figure out who’s trying to scam you. Then, consult with an attorney about your options for recourse.

      Should you consider getting a loan in the future, make sure you apply for a short-term loan from trusted companies.

      I hope this helps.


Go to site