AVOIDING MILITARY LOAN SCAMS
Service members and their families often find themselves the targets of various scam artists, from calls claiming to be from the Red Cross to unnecessary insurance products pushed on young military families. Military lending scams are also common, but there are several ways you and your family can protect yourselves.
The following tips can help you and your family avoid military loan scams, get the right loan for the right price and protect your financial future.
Never pay upfront
Some disreputable lenders will ask for some sort of loan payment before you’ve received a penny of your loan. Reputable lenders won’t ask for a payment upfront.
Don’t get taken for a ride
One of the most prevalent military loan scams have to do with auto purchases, with some car lots knowingly selling inferior cars or aggressively repossessing them. Do your research and know how much the car is actually worth. Get the car’s accident history report and have a mechanic look the car over before you buy. Finally, make sure the payments are well within your budget so you don’t lose your car by being just one day late on your payment.
Watch the insurance
Although not technically a “military lending scam,” the purchase of various insurance products can drastically affect your finances. Remember that service members have the option to buy Servicemembers’ Group Life Insurance (SGLI) at very favorable rates. Only purchase the insurance you need, not what some agent wants you to buy.
Pick a stable company
Some scammers set up a storefront, take advantage of many service members and their families, then leave town — all in a matter of months. Make sure the company with which you are dealing is stable and has a track record that goes back several years.
Be smart online
Online scammers can do a great deal of damage to your finances quickly and easily. Following a few rules and tips from the article, “Tips for Online Borrowing,” by Pioneer Services will give you the information you need to avoid any type of online military lending scam.
Avoid payday loans
Before 2007, many service members fell prey to payday lenders who offered fast cash but charged extremely high interest rates and automatic “roll overs” of debt. A study by the Center for Responsible Lending found that a payday loan of $325 typically lead to a total payback of $800! Though largely discouraged from doing business near a military installation, payday loan companies still exist in some areas, including online. Avoid these, and consider a military installment loan instead. With set payments and fixed terms, you’ll know how much you are borrowing, what the payments are and how long it will take to repay your loan.