If you’re looking for a personal loan, it may be reassuring to know that many legitimate lenders and services are available. However, one should be very wary of scammers who want to take advantage of consumers who let their guard down. Nefarious individuals are rampant in today’s age of technological advancements that help them target vulnerable people.
The Federal Trade Commission (FTC) announced that in 2022 alone, scammers stole an estimated $8.8 billion from Americans. Recent reports also indicate that consumers lost over $10 billion to fraud in 2023, proving that scams have become more sophisticated. Scammers look to target victims who are most vulnerable and desperate for financial aid.
This is why it’s so important to avoid falling prey to loan scams, which can lead to devastating financial losses and massive stress.
What Are Loan Scams?
A loan offered under false pretenses to deceive the borrower is known as a loan scam. Scammers lure victims by making elaborate promises they cannot deliver on or trying to hide the loan’s actual cost. Loan scammers are clever and can go to great lengths to achieve their goals. For example, they may use fake company logos and caller ID numbers to project themselves as legitimate agencies.
Ultimately, their goal in offering you a loan is to do one or more of the following:
- Request permission to access personal accounts/legal ownership of property.
- Gain financial information like credit card number or SSN (Social Security Number).
- Charge very high hidden fees or high interest rates.
- Charge for services or products that the consumer will not actually receive.
How To Identify Loan Scams?
Loan scams can come in many shapes and forms, but scammers often use the same tactics. Here are some common red flags to watch out for:
The Lender Asks for An Upfront Fee
A genuine lender will never ask for an upfront fee to access your personal loan funds or paperwork. So, if a lender requests payment to access funds, it’s nearly always a warning sign of a scam!
Unrealistic Promise of Guaranteed Approval
Genuine lenders will comprehensively review your financial details, such as credit history and income, before they approve. A thorough review of your financial history is performed so the lender can assess your ability to repay the loan.
If you’re guaranteed approval even before your finances are evaluated, it’s a clear red flag. Generally, scammers offer loans with approval guarantees for people with bad credit histories or those struggling financially. The offer is almost too good to be true, to tempt those who are economically vulnerable to jump at the chance without too much investigation.
Promise To Clear Off Debt
When a deal sounds too good to be true, it most probably is. Many loan scammers convince consumers that their debts will be cleared off. They do this by claiming to collect debt payments to help settle off an existing source of debt. It’s best to avoid such offers and work directly with the lender to discuss options for making quicker progress on repaying your debts.
The Lender Contacts You With An Offer
A genuine and reputable loan lender will not resort to advertising their services by calling consumers and making a loan offer on the spot. In fact, it’s illegal for a loan issuer to offer a loan over a phone call. So, if you have been reached out by a lender this way, it could be a warning sign of a scammer attempting to access your personal banking details.
Refrain from responding to lenders who offer loans via phone, email, or even door-to-door solicitation.
Lender Is Not Registered in Your State
Remember, if your lender is not registered in your state, it cannot legally lend money to anyone. Before you proceed with any loan offers, take some time to double-check whether the lender has their registration in order by contacting your state attorney general or a banking/financial services regulator.
How To Identify Genuine Loan Offers?
Loan scams are rampant, but don’t let them scare you off from getting a personal loan if you are in need of funds. However, it is imperative that you are careful when finding a reputable loan lender. Here are some steps to help you.
- Ensure that the lender is registered in your state.
- Check online reviews of the loan lender. Reading customer experiences will give you an idea about the lender’s trustworthiness.
- Check the lender’s online presence, including social media platforms and a professional website. Ensure the website offers helpful information to help your decision-making process. Moreover, if the website does not have accurate contact details or a physical address, that’s a massive red flag!
What Can You Do If You Suspect a Loan Scam?
If you believe you have fallen prey to a loan scam, it’s time to act fast and protect yourself from further harm and losses.
- Cease all forms of communication with the scammer. If you have made any payments or provided information they can use to commit identity theft, take immediate action to secure your information.
- Collect as much evidence as you can. Don’t dismiss even a small detail because the more evidence you gather, the easier it is to report the scam.
- Report the scammer to the relevant authorities, such as the local law enforcement agency, the FTC, or the Consumer Financial Protection Bureau (CFPB).
- Watch out for your credit because if the scammer has your personal information that they can use to open credit accounts in your name, it can seriously damage your credit score. To stay on top of things, you can sign up for credit monitoring or freeze your credit to avoid fraud.
Final Thoughts
Loan scams are getting increasingly sophisticated, making it all the more important to be aware of any red flags. Even if the offer is very tempting, take some time to sit down and think it through. If it seems too good to be true, it often is!
Seek out lenders who value transparency and offer complete disclosure of information. At the same time, if you suspect a scam, don’t procrastinate. Protect yourself and others from falling prey by reporting the scammer to the relevant authorities.
