Personal loan scams are fake schemes by lenders to trap you and collect money from you in an illegal way. Lenders who carry out personal loan scams intend to collect your personal information and fees to take advantage of it.
Also, they have no intention of providing you with the loan as well. Fortunately, certain factors can be checked before opting for a loan.
Staying away from personal loan scam
Through a personal loan scam, lenders obtain your social security number without actually lending money.
They even do not make a credit check and get all your information. Some lenders make unrequested loan offers and, upon collecting your information or collateral, disappear.
Many genuine lenders offer one hour loans and other personal loans. But some others trap the customer and get all the required information. Since these loans are lucrative and attract people, many borrowers become victims of these fraudulent activities.
You have to keep an eye on these fraudulent activities and raise the alarm if a lender contacts you with the same conditions.
You can read reviews about these lenders online and be-conscious before making any decision.
Ways to spot a personal loan scam
- The lender directly contacts you
Usually, without applying for the loan, you do not get calls from lenders. If you have applied for a loan, you may get prescreened calls depending on your credit history.
But if you are being contacted without applying for a loan, be cautious. Personal loan scammers normally contact the borrower through phone or in person as it is a better way to get access to personal information.
Also, it will help them to get information about the borrower’s bank accounts.
To be clear about your lender, you can check the lender’s number on the state attorney general’s website. This website authenticates the lender’s existence on its board.
If the lender is contacting you directly and is assuring your approval without any cross verification, be careful and do not give any information to the lender as it is likely to be a scam.
- The lender assures Loan Approval
Another indicator of fraudulent loan activity is the guarantee given by the lender. If the lender guarantees you the loan approval irrespective of your bad credit score, take a step back and report.
Usually, a lender offers a loan on various factors such as credit history, employment, debt-to-income ratio etc. If the lender is persistent on guaranteed approval, it’s a scam.
- No credit check required
Lenders who do not require your credit score for your loan approval are fraudsters. Every personal loan offered by a lender or a bank requires a detailed credit score check.
This is done to minimize risk from the borrower’s side. In case of bad credits, too, the lender runs a credit check. Therefore, credit checks are an important part of the loan process, and if that is missing, it is an indication of a scam in the process.
- The lender fee is not disclosed
Every lender has a fixed fee that they charge from the borrower at the time of lending. Personal loan scammers usually do not disclose the fees upfront.
The lender is deliberately vague about his fees and pressurizes the borrower to sign the loan contract as soon as possible.
All the legitimate lenders are open about their fees, and most have them have their fees on their websites. Upon non-disclosure of the fees, you are likely to get trapped in a scam.
- You are asked to make payment through a credit card
Usually, it is the borrower’s wish to pay the fees in any form. If the lender forces you to pay the fees through credit cards or gift cards, you are likely to become the target of a scam.
Normally, lenders ask for the traditional methods of payment, such as online methods or cheques. Getting a payment request on the phone or asking for a gift card should be considered a red flag and avoided.
- The lender does not have a website
Banks and lenders have a secure website as they handle confidential information such as account statements, social security numbers, login credentials etc. If a lender approaches you and does not have a secure website, be alert.
To cross-check a lender’s website, you can check the https prefix of the website to check if it’s secured. In case the website is not secure, you are likely to be trapped in a scam.
- There is no physical address
Legitimate lenders always have a physical address in the form of an office from where they operate.
An office not only gives surety to the borrower but also makes the lender credible and accountable. A physical address is essential from a legal point of view.
Conclusion
With the increasing number of frauds, the borrowers need to be careful and alert.
You have to be very careful about the information you share online on various websites as a fraudulent lender may watch over you. Follow your instinct and always look for registered lenders.