11. Be Careful With Automatic Withdrawals
Some lenders may authorize automatic withdrawals from your bank account.
Understand:
- How much will be withdrawn
- When it will be withdrawn
- Whether payments are recurring
- What happens if there are insufficient funds
The CFPB warns that failed electronic withdrawals can potentially result in lender fees and bank or credit-union fees.
Make sure you understand the authorization before agreeing to automatic payments.
12. Verify the Lender
Before sharing personal or banking information, verify that the lender is legitimate.
Look for:
- A clearly identified company
- Verifiable contact information
- Transparent loan terms
- Appropriate licensing where required
- Clear privacy policies
- Accessible customer-service information
Be especially cautious with websites promising guaranteed approval or extremely fast money with little or no explanation of costs.
13. Avoid Upfront-Fee Loan Scams
Be skeptical if someone promises a loan but first demands money for:
- Insurance
- Processing
- "Guaranteed approval"
- Taxes
- Verification
- Application release
The FTC warns that advance-fee loan scams often involve promises of guaranteed credit in exchange for an upfront payment.
A legitimate lender should clearly explain its fees and loan terms before you agree.
14. Keep a Repayment Fund
Once you receive the loan, avoid treating the entire amount as extra spending money.
If possible, set aside money specifically for repayment.
For example, if you know that $300 will be due in three weeks, gradually reserve money for that payment instead of waiting until the due date.
This can reduce the risk of scrambling for money at the last minute.
15. Consider Paying the Loan Early
If your agreement permits early repayment without a penalty, paying off the loan sooner may reduce interest costs on some types of loans.
However, check the agreement first. Not every loan calculates interest the same way, and some products may have prepayment conditions.
Do not drain your entire emergency fund simply to pay off a loan early if doing so would leave you unable to handle another immediate expense.
16. Build an Emergency Fund After Repayment
Once the loan is completely repaid, consider directing some of the money you were using for loan payments toward emergency savings.
Even a small emergency fund can help you handle future unexpected expenses without immediately relying on expensive credit.
A long-term goal could be to gradually build enough savings to cover several months of essential expenses, depending on your circumstances.
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Before accepting a loan, ask yourself:
- Do I really need to borrow?
- Am I borrowing only the amount I need?
- Have I compared multiple lenders?
- Do I understand the APR?
- Do I know all applicable fees?
- Do I know the total repayment amount?
- Can I afford every payment?
- Do I understand the due dates?
- Have I checked the lender's legitimacy?
- Do I know what happens if I miss a payment?
- Could I repay the loan without taking another loan?
If you cannot confidently answer these questions, consider getting more information before accepting the offer.
