October 31, 2023

Predatory Loans and Loan Scams

Some of the common predatory loans and loan scams discussed in the provided information include:

  1. Cash-Advance Loan: This type of loan is a small, short-term, high-interest loan offered in anticipation of receiving a future lump sum of cash or payment. It includes payday loans and tax refund anticipation loans.
  2. Payday Loan: Payday loans are small, high-cost loans typically due within two weeks. They require the borrower to provide a post-dated check or access to their bank account as collateral. These loans are illegal in New York State due to their high fees and potential to trap borrowers in a cycle of debt.
  3. Tax Refund Anticipation Loan: Some tax return preparers offer "instant" or "fast money" refunds, which are actually loans borrowed against the anticipated tax refund. These loans often come with high interest rates and fees, even if the refund is smaller than expected.
  4. Advance Fee Loan Scam: This scam involves a company claiming they can guarantee a loan in exchange for an upfront processing fee. Legitimate lenders will not guarantee a loan before application, especially for individuals with poor credit.
  5. Government Grant and Loan Scam: Similar to the advance fee loan scam, this scam involves companies promising government grants or loans in exchange for fees. These offers are often fraudulent, and the information provided can typically be obtained from public sources.
  6. Bounce Protection Programs: Some banks offer overdraft protection services, allowing transactions to go through even if there are insufficient funds in an account. However, these programs come with fees that can accumulate if the account remains negative.
  7. High Cost Home Equity Loans: These loans use the equity in a home as collateral. Homeowners may be persuaded to take out larger loans than necessary with high interest rates and fees, putting their homes at risk if they fall behind on payments.
  8. Auto Title Loans: These small, high-interest loans use a car as collateral. Defaulting on the loan can result in the loss of the car.
  9. Rent-to-Own: Renting furniture or appliances may cost significantly more in the long run compared to purchasing them outright. Missing payments can lead to repossession of the items and forfeiture of any payments made.

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