Loans by mail: Before you sign on the dotted line
By:   //  Consumer News

The bills are piling up and stress is mounting. Then, the mail is delivered and there’s a check for $3,000 from a legitimate financial institution.

The process is simple: sign the check, deposit it into a checking or savings account and make low monthly payments. Sound too good to be true? It probably is.

Loans by mail may look enticing, however, it’s important to read the fine print. A $3,000 loan could cost an additional $1,400 in interest.

There are other hidden fees as well. Some financial institutions charge a fee to process each online or telephone payment. The fee can range from a couple dollars to $10.

Once the check is signed and deposited, it automatically becomes a loan that needs to be repaid. Most often the payments begin one month from the date on the check–not the date the check is cashed. That’s another reason why it’s so important to read the fine print.

Late fees can be excessive and if paying by mail, it’s best to send the payment in at least one week in advance to avoid late charges.

While these loans are legitimate, although costly, they have helped those who are having financial problems. The loans are unsecured and can be used for anything, including debt consolidation or home improvements. They are most often sent to homeowners.

There are, however, other checks that arrive in the mail that aren’t legitimate. Hundreds, if not thousands, of Americans have been scammed when cashing a “loan” check in the mail only to have it bounce, leaving the consumer responsible for the amount of the check if it was cashed or had checks written against it.

It also pays to be on guard for checks that look authentic, yet aren’t real checks. They are hidden ads disguised as checks and unless the fine print is read, it’s easy to mistake these checks as authentic.

For those in need of financial assistance, it’s best to visit a financial institution in person. There’s a good chance of getting a better interest rate, easier payment terms, and lower late payment fees. Generally, there’s not a payment processing fee or any of the other hidden fees that can be attached to the mail loans.

When loan checks arrive in the mail that aren’t going to be used, it’s best to write “void” across the front in large letters and shred into tiny pieces.

For those interested in using the check, read the fine print and be aware of not only the amount owed with interest but the hidden costs as well. Search for the financial institution online for reviews.

Image: Flickr/401(k) 2012

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