3 Warning Signs of a Dodgy Poor Credit Loan

A special type of loan has never been more popular than they are right now with large numbers of people in the UK suffering from the affects of past financial problems.

Unfortunately this has led to some lenders taking advantage of people who are desperately in need of money to pay the bills or an emergency expense.

Here we identify some of the more common iffy practices, we have highlighted 3 of the most common warning signs to be aware of.

Don’t Leave Your Common Sense Behind

If regular financial options from your bank or building society are out of your reach at the moment, it is crucial that you do not leave your common sense behind when doing your research for alternative options.

Scams such as the letter through your door saying you’ve won a competition, then having to ring a premium rate number to claim the prize are easy to spot.

But some of the tactics used by the less ethical lenders out there are a little sneakier.

One classic example of a dodgy option was highlighted in the Guardian recently:

The payday lender that charged 16,734,509.4%

OK, so 3 of the most common warning signs include:

1. Does the lender look legitimate with a Credit Consumer License?

All reputable lenders must be Authorised and regulated by the Financial Conduct Authority, having registered with the Information Commissioners Office and have a Consumer Credit Licence (CCL) Number. All this information should be easy to find out from their website.

Quite simply you should not deal with any company who does not have a CCL, for there are plenty of reputable lenders out there that do.

2. Does it sounds too good to be true?

A Say No To Payday Loans SignThe unfortunate fact is, that for someone who is paying the price for past financial mistakes, the only available options will typically be far more expensive than the ones available from their bank.

The available options will typically range from around 50% APR for guaranteed long term options, to up to 5000% APR for small shorter term borrowing!

So if something does not ring quite true, there is every chance that something is not right.

This is a question that will often stand you in good stead throughout all walks of life, if something sounds too good to be true, it usually is.

There are a great number of legitimate lenders who will happily offer options to people who have been shunned by the banks but there are always contingencies put in place to reduce the risk to the lender (i.e. guaranteed loans).

Have you been approached by a lender who is prepared to skip the requisite checks? These checks are a crucial part of the application process for all quality lenders and if your lender is prepared to skip this, there is every chance that the offer you receive will come with an astronomical APR.

Deals that seem too good to be true are usually just that.

3. Are You Expected to Pay Upfront?

This one can be a little tricky and should always be approached with a slightly more open mind for the following reasons.

If you are using a broker, you will be a charged a fee by the broker for the use of their services. If however, you have approached your lender directly, any up-front fees should be viewed with extreme caution.

Please note – Any additional payment should be considered to be ‘up-front’ right up until the moment the loan is credited to your account.

If you are asked for any up-front payment for any of the following reasons, the alarm bells should again begin to ring.

  • Payment is needed up-front for insurance
  • An initial up-front payment is required to activate the agreement and verify your personal details
  • Payment is required to allow a third party to set up the details

These are all extremely unlikely to be true and will almost certainly lead to a loss of money.

Additional Tips on Avoiding Dodgy or Fake Options

The Citizens Advice Bureau have offered their top tips on aspects to avoid:

  • Never pay money up front
  • Never give out bank account details to cold callers
  • Be very wary of cold calls and internet sites offering quick and easy options
  • If it looks too good to be true, it usually is
  • If you need financial help, shop around, use a trusted source and always check the paperwork
  • If you’ve already paid money up front for a non-existent loan, inform Trading Standards (www.tradingstandards.gov.uk). The Consumer Credit Act says that all but £5 of any brokerage fees should be refunded if no loan is taken up within 6 months.

For more information, take a look at the following Citizens Advice Bureau article – Cold call credit cashing in on recession misery

Cold call credit cashing in on recession misery

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