The Truths and Myths about Advance Fees

advance feesAdvance fees are monies that you pay that you pay to a person or company before receiving something such as a loan or investment. There are many cases where advance payments are required. Consumers with bad credit may be required to pay companies in advance, and insurance companies generally require an advance payment in order to extend coverage to the insured party.

Advance fees are greatly misunderstood. It’s important to understand that the majority of people refusing or objecting to paying advance fees, particularly in the area of acquiring corporate finance, are people with something to hide.

Advance fees are known by other names. Attorneys and accountants call them retainers. Many ATMs charge you a cash advance fee when you take money out of the machine. The entire insurance sector is nothing but advance fees. You’re paying in advance for something you hope will not happen. Charging advance fees for genuine services is not a scam.

Many stories you read on social media about people who paid advance fees and never received the service they paid for are rarely true. These stories are written by angry people who didn’t get what they wanted.

The argument that paying advance fees is a scam revolves around promises. It is the promise that is the scam not the payment.

Individuals and businesses pay fees for a wide variety of reasons. An individual may pay a financial advisor a fee for helping choose and manage investments, and a family may pay a fee to a real estate broker when selling a home. A business may pay a fee to an accountant to help manage its books, and to a security company to make sure that the building is protected after work hours.

Fees charged by banks are less likely to be transactional in the sense that the account holder has not requested a service. In some cases, as when an account is overdrawn or a credit card payment is made late, a fee is charged as a penalty. In other cases, such as when a bank charges a monthly fee to checking account holders, the fee has little to do with the cost of maintaining the accounts.

Corporations seeking business finance who refuse to pay some form of advance fees rarely if ever receive funding. The majority of them won’t pay because they know they are not fundable, have no faith in their own project, or express ignorance of the funding process by asking for a guarantee.

Funding any project is based on two elements. Truth and facts. When everything a borrower claims to be truthful is proven truthful and all the facts he presents are proven factual, funding is achieved. Omitting something which a borrower feels irrelevant or making false or unprovable claims is cause for immediate disqualification.

Examples of Advance Payments

There are many examples of advance payments in the real world. Take prepaid cellphones, for instance. Service providers require payment for cell services that will be used by the customer one month in advance. If the advance payment is not received, service will not be provided. The same applies to payments for upcoming rent or utilities before they are contractually due. In real estate, closing costs are the extra expenses that buyers and sellers pay on top of the purchase price at settlement of a real estate transaction.It is common practice within the financial services sector to charge a fee in advance for a service. Just be careful to not conduct your business with anyone offering a promise.


Loan brokers should not be confused with mortgage brokers, who arrange real estate loans, or money lenders, which include such entities as banks, savings and loans, and credit unions. Loan brokers cannot make loans and do not lend money directly to borrowers.



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