Imagine this. You drive up to your bank’s ATM, and instead of your normal screen, you see an offer for a personal loan. Do you want to borrow an extra couple hundred dollars or more? Would it be convenient for you to be able to get a loan while at the drive-up? What about if the company you work for were to offer an ATM loan as a personal loan, but instead of traditional collateral, you were told you must give them both your ATM card and your PIN number until the loan was paid back? Would you consider that a better option? Both of these loans pose risks, and may not be the best option no matter how dire your financial need may be.
The Most Obvious Danger of an ATM Loan
The easiest to spot danger of doing an ATM loan like this is that your creditor may remove more than the amount you agreed on at the time of payment. Since this person or company has both your ATM card and your PIN, they have full access to your money once it has been deposited. If they take out extra money, claiming it could be a fee, you could easily be in a situation where you couldn’t do much about it, since you were the one to give your card and personal information to someone else.
Another danger of taking out an ATM loan is the cycle that it can create. You need money, so you take out a quick loan, but then when you pay it back come your next payday, it leaves you short again. This may lead you to taking out another loan, repeating the cycle. The more you do this, the more fees you end up paying, and the longer you wind up stuck in a situation where you are struggling to make ends meet. By having to be more careful with your money, you learn how to best budget your income and how to get out of this situation, rather than just keep repeating the cycle.
If you take your cash out of the ATM and simply leave, you may completely miss that your ATM screen changed to a loan offer. However, if the person behind you comes up quick enough, they may see that offer before them. To some, that’s not even a consideration, but to others, that is a tempting offer they may not be able to turn down. All they have to do is agree to the terms, knowing they will never have to pay it back. After all, the loan was put on your account, not theirs.
Banks Can Assign Whatever Charges and Fees
Since an ATM loan is coming directly from a bank through their own ATM, they have the potential of being able to add in extra charges and fees that you will either agree to so you can get the loan, or walk away from. It could leave you facing some very high fees, which could make catching up with the payments a lot more difficult. Since an ATM loan would be available any time, day or night, holiday or weekday, they can add fees for the convenience of the service. This could really add up, making this single situation into an ongoing problem.
While ATM loans do have some perks, they also have some drawbacks. Unless you are in a situation where you have no other options, you should avoid ATM loans whenever possible. It could leave you in a place where you are fighting to regain your financial footing for a very long time to come.