There is still some debate whether the COVID-19 stimulus checks are enough to sustain people through this difficult time. Congress is in the process of negotiating a third round of financial relief, and it could take several weeks before it reaches you.
Going by previous stimulus checks, it takes about seven days to send out after being approved. Tap or click here to see a nasty COVID-related scam making the rounds.
Since it will be a while before relief checks are sent, many people could look to a cash advance app for immediate help. There are some dangers involved with these types of apps to watch for. Let’s take a look at some of the potential risks.
How loan apps work
A cash advance loan app allows you to deposit earned wages into your bank account before it’s officially payday. It is essentially allowing you to advance your wages.
At the end of the month, however, the amount that was advanced to you will be deducted from your wages. Some of the cash advance apps work with employers, while others work directly with the consumers.
Some of the most popular cash advance apps are Earnin, Brigit, Current and MoneyLion.
Dangers of cash advance loan apps
Your personal information should always be safeguarded. But by using an advance loan app, you might be handing over sensitive information. Almost all apps will need your banking account details and some may request your Social Security number.
The Better Business Bureau also suggests before signing up for one, research it first and watch out for hidden fees and other pitfalls.
Here are some tips from the BBB to consider before using a cash advance or payday loan app:
- Understand how cash advance loan apps work: Some cash advance apps work based on earned wages by partnering with employers, while others work directly with consumers. After calculating your current earnings, apps grant you a small loan. The amount of your loan is then deducted from your next paycheck. Some apps require monthly membership fees. Others charge fixed fees for loans or allow you to make voluntary “tips.”
- Get to know the lender: If you decide to use an app to get a cash advance, look up the financing company on BBB.org first. Make sure the company has a reputation for honest business practices. In addition, ConsumerFinance.gov recommends finding out if the lender is licensed by your state, which means better protection.
- Read the terms carefully: Take your time reading the terms of the loan carefully. Be sure to understand when the loan must be repaid and how much you will owe if you don’t pay on time.
- Find out about fees: Be suspicious of cash advance apps that claim to be totally free. That means there are usually hidden fees and costs. Fees may be disguised under other names including “tips,” “donations,” “membership fees,” or “premium account access.” Find out what you’ll pay and be aware that fees that seem small can add up over time.
- Be careful with your personal information: Most cash advance loan apps need access to your banking information to work. Make sure the company’s website and connections are secure and read their data privacy policies before sharing your information.
- Never pay upfront fees: If a lender asks you to pay fees before giving you any money, don’t agree. Charging consumers undisclosed upfront fees is illegal and a sign of a scam.
Those are a few BBB suggestions to stay safe. There are more. You can see all of the Better Business Bureaus suggestions here.