First time user? Sign Up for Pay Now. Link will open in a new window/tab.
June 13, 2018
Unbiased Financial Information Provided by Financial Finesse
An unexpected expense is all it takes for consumers with little or no savings to get into trouble. Borrowers facing an emergency rarely take the time to shop around or understand all the terms of the loan they're offered. That hastiness can be extremely expensive, especially if you end up with a high-cost loan or, worse, become the victim of a loan scam.
When getting any type of loan, it's important to determine the annual percentage rate (APR). The APR will be higher than the interest rate you're quoted because it takes into consideration other charges, like loan origination fees.
Here are some of the fees and features that add to the cost of a loan:
There are many loans or credit arrangements that, while legal, may not be in your best interest.
Rent-to-own: Customers without the cash or credit to buy the big-ticket items they need (like appliances, electronics and furniture) often "rent-to-own." Because only a relatively small part of the monthly rental fee is applied towards the purchase of the item, the renter ends up paying much, much more for the item in the long run than he or she would using some other form of financing.
Paycheck loans: Some companies offer loans, or advances, on your paycheck. Typically, you write the lender a post-dated check in exchange for cash now -- less a fee, of course. For instance, you might write a check for $250 and be given $225 in cash. When your payday rolls around, the lender cashes the check and recoups the loan amount. The fee on these loans is typically about 10 to 15 percent of the amount of the check, effectively a much higher interest rate than a credit union or bank would charge. For example, a $500 advance payable in two weeks with a fee of $75 (15 percent) works out to an interest rate of nearly 400 percent a year!
Advance loan fees: If a loan broker guarantees that you will be approved for a loan but wants you to pay a fee before the application is submitted or the loan offer is confirmed in writing, you may want to think twice about continuing with the transaction. There have been many scam artists who have simply taken applicants' up-front fee and disappeared.
Here are some of the things you can do to avoid high-cost loans and protect yourself from scams:
Look out for others. If you know someone who might be a target for high-cost or disreputable lenders (typically the elderly, the financially inexperienced, and those with poor credit), alert him or her to the danger of signing any loan agreement without someone else reviewing it.