6 Signs to Identify a Personal Loan Scam

Unexpected bills, home repairs, or other life events can sometimes leave you needing financial assistance. The last thing you want to deal with is a scammer looking to exploit your situation. Unfortunately, fraudsters prey on this vulnerability, posing as lenders to steal your money or personal information. With the rise of online loan applications, it’s more important than ever to be aware of the tactics scammers use.

This blog will help you recognize deceptive loan offers and protect your finances.

6 Warning Signs to Spot Personal Loan Scams

• Unlicensed Lenders

Legitimate lenders must be licensed in every state they operate in. A lender unwilling to verify their registration is likely a scammer. Please don’t rely solely on information displayed on their website. Verifying their license is a simple step that can save you a lot of trouble.

Visit Your State’s Regulatory Website: Most states have a website for their attorney general’s office or bank regulator. These websites often have a searchable database of licensed lenders. Enter the lender’s name and confirm their license status.

• Beware of Unsecure Websites and Shady Reputations

Before sharing any personal information, ensure the website is secure. Look for “https” and a padlock icon in the browser’s address bar, signifying a secure connection. These elements indicate the website encrypts your data, protecting it from prying eyes.

Research the lender’s online reputation to confirm (or quell) your suspicions. Here are some helpful resources:

• The Consumer Financial Protection Bureau (CFPB) preserves a complaint database. Search for the lender’s name to see if any complaints have been filed against them.
• The Better Business Bureau allows you to check a company’s rating and read reviews from past customers.

• Guaranteed Approval? Probably Too Good to Be True

Genuine lenders assess your creditworthiness before loan approval. Promises of guaranteed approval are a red flag. Legitimate lenders require detailed financial information to make informed decisions. They will typically request documents like bank statements, pay stubs, and tax returns to ascertain your income and ability to repay the loan.

Loan attributes such as high interest rates and unfavorable terms are common with lenders who offer approval without reviewing your financial situation. These lenders might engage in predatory lending practices, offering loans with heightened interest rates and unfavorable terms, which could put you in a worse economic crisis in the long run.

• Upfront Fees and Hidden Costs

Reputable lenders don’t require upfront fees before you receive the loan amount. These fees are generally deducted from the loan amount or included in the repayment terms. If pressured to pay upfront costs to secure a loan, walk away and report the lender to your state regulator.

Carefully review loan attributes such as application fees, processing fees, or security deposits to ensure you’re aware of any potential hidden costs before agreeing to a loan. Once you pay the fee, the scammer may disappear with your money, leaving you with no loan and no way to recover your funds. 

• Pressure to Act Immediately

Scammers often employ high-pressure tactics to rush you into decisions. They might offer limited-time deals or threaten consequences for not acting immediately. Legitimate lenders value informed decision-making and encourage you to take your time.

Beware of lenders who insist you apply immediately, or the offer will expire. Scammers may threaten to report you to a credit bureau if you don’t accept the loan right away. Carefully read the loan terms and conditions before committing.

• Unsolicited Loan Offers

Genuine lenders typically advertise or send emails inviting you to apply, but they won’t call or text you with unsolicited offers. Scammers might purchase contact information and use it to target potential victims. Be wary of any loan offer that arrives unexpectedly, mainly by phone. If you receive an unexpected loan offer by phone, text, or social media, it’s best to ignore it.

Conclusion

Following the tips in this blog will help you spot deceptive lenders and protect yourself from scams. A little research and a healthy dose of skepticism can go a long way in protecting your hard-earned money. Take your time, compare offers, and don’t be afraid to walk away from any situation that feels suspicious.