By Eli Waldman
Director of Recovery Services
Sometimes a little extra money can get us through a tough patch or help us afford a major expense, such as home repair or a special event. Loans can help cover something that our regular income may can’t be stretched to cover right away. Loans can be helpful or they can cause tremendous financial damage if taken unwisely.
In addition to being careful about the amount of the loan, the interest, and the terms, consumers have to use caution concerning the type of loan. There are some loan varieties that should be absolutely avoided regardless of the circumstances. There are also many loan frauds that are meant to deceive customers or exploit them with tricky terms and huge interest rates.
If you have fallen victim to loan fraud or have a dispute with the lender over terms, conditions, and sudden alterations in the interest rate, contact fund recovery professionals who will help you get your money back.
MyChargeBack experts give guidance to consumers who are trying to recover their funds from broker disputes, loan scams or other types of fraud. Talk to MyChargeBack if you have been the target of fraudulent activities or are involved in disputes.
Neither a Borrower Nor a Lender Be: When Possible, Avoid Loans
The character Polonius in Hamlet warned, ‘Neither a borrower nor a lender be.’ While most of us can’t follow this advice precisely and may need a loan from time to time, it is best to keep the spirit of Polonius’ advice in mind and use loans as only a last resort.
One of the biggest mistakes when it comes to taking loans is being in too much of a hurry to make a decision. There are times when people take loans out of a sense of panic rather than looking for other solutions. Maybe it is better to delay refurbishing a home and save up the money instead? Perhaps a wedding can be delayed or planned with a simpler budget?
Take your time when it comes to financial planning and look at the details carefully. Also, there are a number of loan types that should be avoided entirely when shopping around for a loan. Below is a partial list of problematic loan types:
- Social media loans.
- Payday loans.
- Credit card loans.
- Personal loans from family and friends.
- Bad credit loans.
Social media loans, as the name suggests, are loans that are advertised on social media or on spam emails. These usually promise huge amounts of money with little interest (although these interest rates will increase dramatically at the discretion of the lender) and will state that bad credit is not an obstacle. Always beware of schemes that seem desperate to lend money – they must rely on high-interest rates.
There are many dangers on social media. One is that people can easily disguise their true identity on Facebook or Instagram. These schemes can appear one day, make money and disappear the next. In some cases, they are involved in other types of fraud and use customers’ bank information to launder money, as occurred in one loan fraud that robbed customers in Stoke-on-Trent.
To be safe, avoid all financial deals, including loans and trading, that are advertised on social media. For financial services, look only for companies that have a secured website, are regulated, and offer full transparency into their terms and who runs the company.
Payday loans are designed for people who are struggling to make ends meet and may have chronic problems with money. People who are in this situation may be unemployed or underemployed and do not have the benefits to cover their expenses. Those who are targeted may be overspending or under-earning and need to fill the gap between their wages and what they buy.
Payday loans are usually relatively small at around £500 to £1,000 and are repaid two weeks to a month or on ‘payday.’ They often offer a fixed fee, like £15 per £100. This may seem reasonable, but you are paying up to 400% more than for a regular loan. Even though £15 per £100 seems like just 15%, compare it to paying off a credit card debt, which may be a single-digit percentage, or taking a year to pay off the loan and you will see how expensive these loans are.
Credit card loans are actually getting advance cash on from your credit card. There are many perks to using credit cards on purchases, but one of them is not cash advances. Not only will you pay an 8% fee but will pay interest rates on the advance that is 7% higher than regular loans. Worse yet, cash advances can be addictive, particularly for those with unsustainable financial lifestyles.
If you can’t get a loan from a bank, you may decide to borrow money from family or friends. These loans are the most expensive of all, and not necessarily regarding money. Being a debtor to people you are close to can sour your relationships and create tension. The stress of facing or avoiding someone you care about and to whom you owe money is almost never worth it.
Finally, do not take a loan with any lender that claims that bad credit is not an issue. Any lender should check your transactions, your credit score, and other factors. It is safe to say that any loan company that deliberately targets those with bad credit does not have good intentions. A loan that is easy to get is not worth it and belies bad motives.
What If You Have Lost Money in a Loan Fraud or Dispute?
If you have lost money in a loan fraud or have a dispute based on changing terms or interest rates, it is essential that you work with a fund recovery agency and try to get your money back.
Consult with MyChargeBack experts. We consult with clients and give them information on how to negotiate in a fund recovery dispute. We have a working relationship with regulators and authorities and help you recover your funds.