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5 financial offers that may be too good to be true

Tempted by a zero down payment offer or a short-term loan? A little knowledge can help protect you against offers that make big promises with little payout, so you can recognize something that’s too good to be true in offers that you may encounter every day.

Arrow with payday loan text

These short-term loans are due when you get your paycheck. Finance charges range from $10 to $30 for every $100 borrowed, according to the Consumer Financial Protection Bureau. That can lead to repayment amounts that are hundreds more than what you borrowed.

Get to the bottom of it: A $1,000 payday loan could result in a $100 fee for one week. That’s the equivalent of a 521% interest rate for the year. Consider other options first.

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This may be an introductory or teaser rate: a low interest rate charged during the first few months of a loan that will rise after a certain date.

Get to the bottom of it: Ask if a higher rate will eventually apply, and read the fine print. Before signing, figure out whether you can still afford the payments when the higher interest rate begins.

Furniture, electronics and other stores may offer 0% interest for a set period of time on that couch or big-screen TV. If you are certain you can pay off the item in that period, these can be useful deals.

Get to the bottom of it: Be sure to read the fine print on any loan agreement. After the interest-free period, rates can jump dramatically, and late or missed payments can trigger fees and back interest.

Magnifying glass showing the fine print for example interest rates
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You may be presented with an investment that promises high returns or an opportunity where you make money by recruiting new participants.

Get to the bottom of it: The Securities and Exchange Commission notes that it’s not enough to ask for more information on references, since those can be faked. Research a company’s business and products before investing. Be especially careful, the SEC says, if you can’t find current information from independent sources. Most fraudsters, the SEC notes, spend a lot of time trying to convince you that high returns are guaranteed.

Image showing an envelope and check and free money text

You receive an unexpected check in the mail for $1,000. It may be coupled with an offer to reduce or eliminate debt, positioned as a loan with easy terms or it may simply look like free money.

Get to the bottom of it: What looks like a check may be a solicitation for a loan. If the check is real and you cash it, you may be signing up for interest rates of 30 percent or more.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

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