Loan Scams that Target the Poor

There are numerous legal scams that specifically target the poor and those with bad credit. When money is tight, it is very tempting to be able to erase bad credit or to accept a cash advance until payday. Many of these companies that target the poor are operating a perfectly legal business, but they are not providing a helpful service. They are hurting the consumers that can least afford to lose money on of these scams.

Credit Repair Companies

Credit repair is not always a scam. There are legitimate credit repair companies that help consumers negotiate better terms with lenders. Legitimate credit repair companies teach their customers to live within their means and discourage future purchases made on credit. This is a helpful service and is offered for free by many credit counseling agencies. A legitimate credit repair agency will explain that you can do everything that they do for yourself if you are willing to negotiate with your creditors.

Credit repair companies who offer a new credit identity should be avoided. There is no legal way to establish a new credit identity. Committing a crime at their suggestion will only compound your problems. Avoid any credit repair company that suggests disputing all of the information on your credit report, unless it truly is inaccurate. A common scam involves telling consumers that many lenders will not bother replying to a dispute or that lenders may have lost your original paperwork for a legitimate debt. This implies that you will be let off the hook for your debts and that simply will not happen. No credit repair company can remove legitimate negative information from your credit bureau reports, no matter what they promise.

Payday Loans

Payday loans are a legal scam that target the poor in states that still allow companies to offer payday loans. Payday loans offer cash against a check written by the consumer, which is dated for their next payday. A high fee is tacked on and the check is held by the payday loan company. The consumer can then redeem the check on their next payday or pay the fee again. The check then rolls over to the consumers next payday. It is basically a form of legal loan sharking. Payday loan companies target the working poor who have no credit or bad credit and cannot obtain a loan with more favorable terms.

Predatory Lenders

Despite all of the media attention paid to mortgage defaults due to predatory lending practices, these types of loans are still being written. Predatory mortgage loans are offered to people who do not have the ability to repay the loan and are unable to purchase a home by any other means. Lenders have an obligation to ensure that the borrower has the ability to repay a loan, but companies that practice predatory lending will find ways to work around normal loan requirements. .

Predatory lenders are not limited to mortgage companies. Lenders will finance furniture, appliances, almost anything that people are desperate to buy but cannot really afford. Loans include very high interest rates and unfavorable terms for the consumer.

Fees for Loan Applications

Unscrupulous companies have been promising cash loans regardless of past credit problems. These companies require an upfront application fee Legitimate lenders don't require an upfront payment to approve a loan. If you have poor credit, it's not likely that any legitimate lender will give you a loan.

If you or someone you know is in financial trouble, look toward legitimate credit counseling agencies for help in reducing your debt. An upfront payment is not required. Consumer Credit Counseling Service (CCCS) is a non profit legitimate credit counseling service that can offer real help.