How to Avoid Pay Day Loan Fraud

The bank has noticed an upswing in this type of fraud and would like to help educate our customers as to how this occurs, and what you can do to protect yourself or a loved one from such a scam.

“Pay day” loan fraud is a new trend our bank is seeing where customers apply online for a loan, and as part of the application process, are instructed to enter the online banking ID and password for their financial institution.  Applicants are also asked for the answers to their online banking security questions. The bank has noticed an upswing in this type of fraud and would like to help educate our customers as to how this occurs, and what you can do to protect yourself or a loved one from such a scam.

Once a person enters their banking information into the online application, the unknown fraudster then enrolls in mobile banking on behalf of the applicant, submitting fraudulent checks for deposit through the bank’s mobile app. When the customer comes into the bank to receive their “pay day” funds, they are struck with returned checks that are fraudulent.

Customers applying for loans online that share their sensitive information are not taking into consideration that they have given scammers direct access to their checkbook, including the ability to issue checks from the bill pay feature of online banking.

It is never wise to share online banking credentials! In these cases, an applicant can unknowingly become a criminal suspect themselves as they are referred to as “money mules”, participating in moving money fraudulently. The applicant must then bear the burden of proving that they did not willingly engage in fraudulent activity often involving the police.

When enrolling in online banking, be sure to never share a banking ID, password, or security questions and answers with anyone. A reputable lender will never ask for that information. By following these guidelines, one can avoid a significant loss through a scam.

 

Using a HELOC to Pay Off High-Rate Debt. Is it a Good Idea?

Homeowners might wonder whether it’s a good idea to tap their home equity, or the market value of the property minus what is still owed on it, to pay down other types of debt, especially high-interest credit card balances.

Homeowners might wonder whether it’s a good idea to tap their home equity, or the market value of the property minus what is still owed on it, to pay down other types of debt, especially high-interest credit card balances.

One way to do this, using a home equity line of credit, is growing in popularity — more than $120 billion in HELOCs were created in 2014, an increase of about 22% over the previous year.

How a HELOC works

A HELOC, or home equity line of credit, is a bit like a second mortgage since your home serves as the collateral for the loan. However, a HELOC is a form of revolving debt, like a charge account, in that you’re able to withdraw money up to an approved limit, using a card or check, repay it and draw it down again. Since it’s secured, a HELOC usually has a much lower interest rate than the average credit card or a personal loan. You pay interest only on the amount you take out, and what you pay is often tax-deductible* on HELOCs up to $100,000.

Most lenders limit how much of your home’s value you can borrow. If your house is appraised at $400,000, you could borrow as much as $320,000 on it, including the first mortgage, at an 80% debt-to-value cap. So if your mortgage balance is $250,000, your home equity is $150,000, but the maximum you could borrow on that would be $70,000.

If you have significant debt, say, on a credit card with a 15% interest rate, a HELOC might seem like an easy solution. You could save on interest costs and lower your monthly payments. But proceed carefully. Unless you’re certain you have a stable plan for keeping up your payments, you could be putting your home at risk as a short-term solution to a financial jam.

Fees and risks to consider

Before you go too far, find out what obtaining a HELOC from your lender would cost — it might be substantially more than taking out a personal loan, for instance. A HELOC might require an application fee, property title search, an appraisal and attorney fees and even points, like on a mortgage. Lenders might waive some of these costs, but some also charge annual fees and withdrawal fees.

Most HELOCs have variable rates, so your monthly payments could go up or down periodically. Ask your lender how often the rate can be adjusted, and by how much. Some financial institutions offer fixed-rate HELOCs, but they might have higher initial interest rates than adjustable-rate credit lines.

Suppose your income drops unexpectedly, say from a job loss. If you were to default on unsecured credit card debt, the issuer wouldn’t be able to take possession of your property. But default on a HELOC and the lender could cause you to lose your home.

Using a lower-rate HELOC to pay down high-rate debt can be a savvy financial move as long as you fully understand all the costs and risks and have a stable plan for keeping up with your repayments.

*Please consult your tax advisor for questions.

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Interested in applying for a HELOC or other kind of loan? We can help. Start the loan process here.

 

Financial Considerations Before Traveling Abroad

Financial Considerations Before Traveling Abroad
The number one most important step to take is to notify your bank of your intended travel plans. Not doing so may result in the freezing of your debit card. Our clients’ security is a number one priority for us at F&M Bank, so if we see someone using your account outside of your normal activities, we are going to take precautions to protect you against fraud.

Traveling abroad can be full of excitement and fun, but it takes a decent amount of preparation.  It is important to research hotel ratings, the best price in airfare, and tips for packing appropriate attire; but don’t forget to make sure you make financial preparations as well.


There are many financial considerations to take into account before embarking on your trip.  You will need to consider security, foreign transaction fees, and exchange rates- and you will want a financial plan in place before take-off.

The number one most important step to take is to notify your bank of your intended travel plans.  Not doing so may result in the freezing of your debit card.  Our clients’ security is a number one priority for us at F&M Bank, so if we see someone using your account outside of your normal activities, we are going to take precautions to protect you against fraud.  Simply call your bank branch and your Customer Service Representative will be glad to assist you by putting an alert of your travel plans on your account to avoid any complications.

At F&M Bank, we do not charge additional fees for using your debit card internationally.  However, you will likely be charged foreign transaction fees (usually ranging from 1% to 5%) and ATM fees by the vendor you are using to withdraw funds.  Additionally, many foreign ATMs only allow PIN transactions, so make sure you have your PIN number handy before traveling.  

Here are some other suggestions to keep in mind:  

•    Travel with at least two forms of payment.  If something goes wrong with one, you will want back up.
•    Take photocopies of all of your important documents including your passport, credit cards, debit cards, birth certificate and driver’s license and store them in a different location than the documents themselves.  This way, if something happens to the originals you will be able to prove your identity. 
•    Check your health insurance to make sure you will be covered while you are traveling.  If not, consider purchasing a rider. 
•    The most expensive place to purchase currency is in the airport at your destination.  Consider exchanging money through an international bank prior to departure.
 

If we can answer any questions to help you prepare for your next travel adventure, please contact us.  We are always here to help as Your Community Bank.  Bon voyage!