In 2019, consumers lost up to $1.9 billion collectively to fraudulent practices. Most times, unsuspecting consumers are lured into attractive loan options which often tends to be false. These fraudsters take advantage of the ignorance of unsuspecting and somewhat financially desperate customers to prey on them. This article contains brief enlightenment on everything there is to know about loan scams.
What are loan scams?
Loan scams are fraudulent businesses that are out to exploit consumers who are searching for quick solutions to financial problems. A great percentage of them are found online with no storefront or physical address.
They’re often illegitimate business fronts that offer to lend money but in reality, take money from people. These sites/businesses can be popular and they mostly seek out the consumer with promises of ‘free’ money.
Common types of loan scams
Most types of loan scams seek to either subtract money upfront or pose with a mouth watery term/condition just to lure unsuspecting customers. Here are some of the most common forms of scams.
Loan fee scam
Scammers may try to offer you a low-cost loan in exchange for hundreds or thousands of dollars of fees upfront. Once these fees are received, they will cut off contact without providing any funds. These fees could also be demanded sometimes through cash, gift cards or wire transfers.
No-credit-check scam
While there are some legitimate personal loan lenders that consider more than just your credit score when approving you for a loan, some scammers will promise funds without checking your credit score at all. This is a red flag, since your credit score is usually one way lenders assess the risk of lending to you.
Private student loan forgiveness scam
Some forms of student loan forgiveness are available through the federal government for federal student loans. There are few ways to have private student loan debt forgiven. However, If a company promises to forgive your student loans, it’s likely a scam.
Top 5 ways to avoid loan scams
While this isn’t a comprehensive list, some of the most common ways to spot a loan scam include:
The lender isn’t interested in your payment history
Truly reputable lenders make it obvious that they must look at your credit, sometimes getting financial reports. Most legitimate lenders need to know whether you have a great credit history to make sure that you’ll be just as diligently.
Keynote; Be sure to do your research and read the fine print. Also Make sure you’re working with a lender that’s interested in your previous financial history.
The lender isn’t registered in your state
Every country/state requires that lenders and loan brokers register with the financial regulatory body in the state where they operate. If a lender you’re interested in does not list any registered states, you could be dealing with a loan scam.
Keynote; Check registration as it is a key step to ensure that you’re dealing with a reputable company.
The lender demands a prepaid credit card
Some scammers tend to require prepaid debit cards from borrowers. They claim that they need it for insurance, collateral or fees. This is a scam. Legitimate financial institutions do not require these details to charge fees. Instead, those charges are deducted upfront from your loan.
Keynotes; legitimate lenders will never ask for money upfront. Application and other fees are typically deducted from your total loan amount.
The lender’s website isn’t secure
When visiting a lender’s site, be sure to look out for some key things. Some the things to look out for are;
- A padlock symbol on any pages where you’re asked to provide personal information.
- A URL that begins with “https” instead of “http” (the additional “s” stands for “secure”).
Keynotes; Be sure to review the loan websites you visit. Look out for indicators that they’re secure. These security measures not only make it more difficult for hackers to steal your information, they also indicate that you’re dealing with a reputable business.
Some other indicators that a loan providers might be fraudulent when;
- The lender has no physical address.
- The lender pressures you to act immediately.
- They are probably fraud when they guarantee approval.
- Lastly, when they are not transparent about their fees.
Avoid loans with all these characteristics and you might have a smooth loaning experience avoiding fraudsters.
Conclusion
If you need a loan of any kind, be sure to do your research and compare multiple lenders. This act puts you at advantage as you get to find and go with the most trusted option.