7 Personal Loan Scam Warning Signs That You Need to Know
If you’re looking for a way to cover an unexpected bill, a personal loan can be a good option for you. In any case, you need to verify that you’re dealing with a real creditor and thus not a scammer. A personal loan scam may be in the works if a creditor initiates contact with you, doesn’t check your credit, or makes an offer that seems too good to be true.
The goal of most scammers is to take your money or your identity, and both of these types of scammers can be difficult to spot. If you know what to look for, you can avoid falling for a personal loan scam and find a reputable creditor. Here are seven warning signs that you might be the victim of a personal loan scam.
1. The Lender Makes Direct Contact With You.
Calls from creditors are quite unlikely unless you have just filed for a loan and are obtaining prescreened calls depending on your credit history. However, personal loan scammers frequently initiate contact with their victims via phone, email, or in-person and ask for confidential information in order to get access to their financial accounts.
Any direct, unsolicited loan offer is most certainly a scam, especially if you haven’t already applied for a loan, but you may get phone calls or mailings from legitimate creditors. If you’re doubtful about a creditor’s validity, you can verify their registration with the state attorney general’s office.
Possible indicators between a scammer and a real creditor include their tone of voice and the details they include in their pitch. Indicators of a personal loan scam include an outright guarantee of approval, a lack of clarity regarding fees or other costs, and statements that your credit history doesn’t matter.
2. The Lender Offers Guaranteed Approval With No Credit Check.
Trustworthy creditors are upfront about checking credit, and they may even pull data from all three bureaus, such as Equifax, TransUnion, and Experian. A good repayment history shows that you are responsible with money and can be relied upon by creditors who want to know that you will repay their loan on time.
Companies focused on committing scams are not concerned with your credit score. High-risk borrowers are targeted because they are the most likely to default on their loans, resulting in exorbitant costs and penalties. Avoid any financial institution that makes statements like “All are approved!”, ”We are not concerned with your history. A loan should be given to you. ”, and “Poor credit or no credit?” No issue.”
3. The Lender Is Not Registered.
Lenders are required to obtain registration with the FTC in each state where they conduct business. A personal loan creditor who doesn’t specify which states they operate in is probably not legitimate. The office of the state’s attorney general is the place to go if you want to find out if a creditor is licensed to operate in your state.
The creditor is either running a scam or breaking the law if they claim they are not a U.S. firm or are not needed to register since they conduct business online.
4. The Lender Requires a Prepaid Card or Other Kind of Advance Payment.
Scammers often demand that borrowers provide them with access to their bank accounts or prepaid debit cards. Scammers also make claims about needing insurance, collateral, or payments in order to get their victims to hand over personal data. Don’t fall for it; it’s a scam. Any fees associated with your loan application, appraisal, or credit report will be subtracted from your final loan amount at a reputable lending institution.
Using a prepaid card is a major warning sign. You can’t report it as lost or stolen once you’ve handed it to a creditor, and it’s almost as untraceable as cash. It is feasible to submit a complaint with your credit union or bank if you give the necessary credentials, but the investigation into your claim may take some time. It’s also possible that you won’t be able to get your stolen money back.
5. The Lender Does Not Have a Physical Address.
If the creditor provides a physical address, you can use a mapping service like Google Maps to locate the location. The creditor is likely a scam if the given address does not really exist or if it’s a Post Office box.
Those who are legit will have a real location at which they can receive correspondence. The majority of online-only creditors nonetheless maintain a physical location for administrative purposes. Having a physical location for a business is important for a number of reasons. First and foremost, it allows clients to meet the creditor in person.
Therefore, if you are looking for personal loans, a lack of a real address should raise red flags. More so than with creditors that can supply physical addresses, you should investigate any creditor who supplies merely a post office box.
6. The Lenders’ Website Is Not Secured
Websites pretending to be creditors can be deceptive because scammers often use logos and names similar to legitimate creditors. A scam website can take your money if you enter your credit card number or other sensitive financial information into it.
To verify a website’s authenticity, check for a padlock icon next to the address bar. If the address bar begins with “https” and this icon appears, you may rest assured that the website has not been compromised. Don’t give out any sensitive information until you’ve verified the legitimacy of the creditor, especially if the website isn’t encrypted.
The websites of banks must be very secure because they deal with such a high volume of sensitive information as birth dates, Social Security numbers, and login credentials. To do this, your computer and the creditor’s website must be able to establish an encrypted connection, which is made possible with a Secure Sockets Layer (SSL) certificate.
7. The Lender Is Using High-Pressure Tactics
When looking for a personal loan, it’s important to keep an eye out for deals that will soon expire or loans that have strict time limits for applications. They are probably up to no good if they say their offer will end shortly or you need to take action by tomorrow.
Loan terms and interest rates from reputable creditors tend to be stable and dependent on factors such as borrowers’ credit scores and the current market rate for unsecured personal loans. Some creditors may even waive costs for a limited time, but this is usually only a promotional gimmick and has no bearing on your rate of interest or even other loan terms.
High-pressure lending practices are a red flag that the creditor may not be trustworthy. It could be an attempt to pressure you into acting quickly so you won’t have time to complete the necessary investigation and expose the scam they’re operating. A creditor who offers a cheap interest rate and then claims this rate will only be available for a limited time is likely trying to scam you.
What Should You Do If You’ve Been Scammed?
A scam is a serious problem, and while no one likes to think they’ve been a victim, it certainly does occur. Fortunately, there are things you can do if you think you’ve been a target, such as:
- Collect the required documents – To help your case in front of the authorities, compile any relevant evidence you have, such as emails, screenshots, and so on.
- Contact the police in your area – Making a police report gives you a written account of what happened.
- Get in touch with monitoring organizations – The next step, after calling the police, is to report the incident to the state attorney general’s office, the Federal Trade Commission, and the Better Business Bureau. These organizations can improve their services and safeguard future clients with this data.
- Have a discussion about it with your loved ones – As scammers change their methods, spreading awareness is crucial.
- Report fraud to one of the three major credit reporting companies – All three credit bureaus will be notified of your fraud alert submission if you choose to notify either Equifax, Experian, or TransUnion. In contrast to a credit freeze, a fraud alert notifies creditors that you may have been the victim of a scam and they must inform you to confirm your identity prior to actually giving any new credit.
How to Identify a Reputable Loan Company
There are a variety of respectable loan options available, regardless if you possess below-average credit. Follow these procedures as a foundation in your search for a reliable creditor:
- Look into the available contact information. Even if the creditor is only available online, contact information such as a phone number, email address, and physical location should be easily accessible.
- Seek customer feedback on the web. Customer reviews on review sites like Google and Yelp can shed the most light on a creditor’s service quality.
- Validate the registration. Prior to making loans, legitimate creditors must first register with government organizations. If you need help determining whether a certain creditor is legitimate, you can get in touch with the attorney general in your state.
Final Thoughts
If you’re in search of a personal loan, do your research to find a credible company that offers a competitive interest rate. Many personal loan companies are willing to work with consumers of varying credit profiles in order to help those in financial difficulty.
You should be wary of creditors who try to pressure you into making an immediate payment, especially if you can’t find any information about them online. If you’re not sure which creditor to choose, it’s best to stick with the ones you already know and trust.
