Watch Out for Payday Loan Identity Theft Scams

ElitePersonalFinance
Last Update: February 8, 2021 Identity Theft Loans

Getting a payday loan is already risky. If you don’t pay it back, it could destroy your credit sooner or later. But when it comes to online payday loans and private loans, you can’t be sure whether these sites are safe.

Sure, you have big names like Money Mart, who process around $1 billion annually, and with them, it’s not such a concern. But when you find any random ‘no credit check’ or ‘family allowance approved’ loan, you certainly have a reason to worry.

These emergency financing methods can be advantageous at times. So we don’t want to filter them out, but we do want to stress the importance of due caution.

But if you want to get a full understanding, there are some points to cover first.

Do Payday Loans Put Your Identity at Risk?

Yes, but not necessarily any more than any other finance site type. Even payment processors like PayPal are subject to phishing attacks. In these instances, hackers attempt to collect your private data from committing identity fraud. It’s the same scenario for payday loan sites, whether it’s a fake company collecting information or an actual phishing site.

Furthermore, there have not been any major payday loan company data breaches, yet even big names like Target have compromised their databases. So the insinuation that it’s super dangerous to sign up for these sites is wrong. The mistake comes in choosing the wrong sites in the first place. In comparison, if you buy stolen goods off the corner, it could also prove to be more problematic than purchasing them at your closest Walmart.

So here’s the trick …

You need to know how to find out which payday lenders are trusted.

Just because a site says, “Get $$$ Today!” doesn’t mean it will really happen for you. Most of the sites you find are just lead generators sending you to one of the major lenders. Some send you to other, random offers. Even if one is legitimate, it just takes a data breach to expose your details.

That’s why the best bet is to apply in person. You can get your loan funded quickly. It’s just one extra step. You only have to trust the company directly and their employee handling your information. Otherwise, it’s too easy for a fraudster to steal your details, whether through a fake company or by data compromise later.

Which Payday Lenders Can You Trust?

Generally speaking, you need to go beyond just looking at whether one or a few parameters check out. For instance, don’t base your ability to trust a lender according to just something like whether they have an “HTTP” or “HTTPS” website. It’s not about whether they have an SSL certificate, although you will only want to deal with businesses that do. In the end, it’s a matter of the different ways a company chooses to handle your information.

For once, read the privacy policies, the terms of conditions, and any other legal fine print!

With the Money Mart example, they have faced many regulatory expectations, and thus their system is as robust and secure as possible. If you deal with a small payday lender on the Web, chances are we aren’t talking $1 billion processed yearly. So get a feel for how much the lender has managed and whether they would have the appropriate protocols in place.

Also, really do your background research!

The sad thing is that most payday loan scams can be spotted a mile away. And the ones that are just there to collect your information are obvious tricks.

There are two things you can do:

  • Domain background search. Look to see how long ago they registered their domain via a Whois domain lookup. Archive.org can help you see how a website operated in previous years by viewing archived pages.
  • Business background search. Look through Google to see what type of history the business has, search by company name, site name, phone number, address, and any other identifying information you can find.

This will draw a picture of what you are facing. If the company can be trusted, they will have a verified background. Otherwise, there will be discrepancies, a lack of history, or obviously bad stuff that comes up.

Don’t Trust Payday Loan Reviews

Many payday loan reviews are written by affiliate marketers and even the fraudsters themselves. The only good thing about reviews being on the Web is that the site isn’t lurking in the shadows. The more these companies have to critique, the better. This makes it easier for victims to track their experience back to specific illicit companies.

However, sometimes reading payday loan reviews will give you insight into what good is about to come your way. The clearest example of this is finding a lot of positive user experiences. But don’t rely only on random websites. You want reviews on Google Maps, Yelps, the Better Business Bureau, and even GlassDoor.

Wait, GlassDoor?

Yup … that’s a review site for employees to brag or criticize about their previous or current employer … if they are a longstanding business, you might have an idea of their integrity this way.

Next, you could refer back to our Top 10 Payday Lenders piece. This list is current as of writing this (May 2016), and each of these companies has been thoroughly vetted.

Payday Loan Advertising and Marketing Scams

It is important to differentiate a payday loan scam from an advertising and/or marketing scam. The thing is that payday lenders get a bad rep in the first place, and they are often labeled as a scam for reasons that are not fraudulent. For example, even when they charge within the legal APR rate, they are constantly ragged as scammers for charging too much interest.

You really need to know what you’re getting into and, even better, how you’re going to get out of it because it is a temporary fix. If you expect it to become a long-term resolve, you are setting yourself up for disaster. Those who had a credit card just couldn’t get paid off for many years, even when trying their hardest.

So set up a budget plan to repay your loan.

If you borrow $1,000, you can expect to pay hundreds back on top of it by your next payday. Leaving this unpaid would set you back another few hundred and a late fee. If the debt runs any further, we can pretty much guarantee you won’t ever be able to pay it back, and by then, you’ll be begging the lender to send it to collections.

Ultimately, it is a high amount to pay on an emergency loan, but it could be necessary when you have nowhere else to get it. Out of all payday lenders we have reviewed, we could find the best rate was a 6% APR. This is actually very good. The worst rates we saw from quality lenders were in the range of 2,290% APR.

So even though you might be guaranteed a ‘no credit check approval,’ it might be better to avoid the loan altogether. But again, if it’s an emergency, by all means, go ahead.

Which Payday Lender Should You Choose?

Stick with legit loan companies only.

Next to them, go by ranking in our top-10 list. If you only need a smaller amount (far below $1,000), look for the best option. Only a few of these lenders will lend under $1,000, unfortunately.

Also, consider peer-to-peer lending as an alternative. The verification process might be a little longer, but you will get easy funding and sometimes good rates in the end. We discussed what peer-to-peer lending is all about, and if you’re interested.

Conclusion

It all really comes down to how you handle your information. Now you have no excuse. If you weren’t aware before, it’s now clear that payday lenders are not all frauds. But there are bad apples just like with other businesses you have to watch out for those Facebook, Runescape, and even Plenty of Fish account too!

But the worst thing is sometimes the information stolen by fake payday lending sites gets dumped right back onto the Web. This becomes indexed and easily available to anyone and everyone. Just by looking you up, the revealed details are incredibly personal. The same thing happens with scam web hosting offers.

So, again, your best bet is to stick with a top payday loan provider as they will be likely to handle your information securely. If something bad happens, like when Target had a data breach, you will find out and have a chance to have it fixed and likely at their expense.

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