7 Signs of a Personal Loan Scam
There are countless personal loans available online today. Unfortunately, despite the ease of accessing financing, many more personal loan scams have popped up too. What’s more, it is easy to fall prey to these scammers given that most of them are confidently mimicking genuine lenders.
Today, we will highlight strategies to spot the seven most notorious, common and phony scams that are worthy of your vigilance. Lift your chances of getting approved for a personal loan using our professional solutions accompanying every personal loan scam listed below.
1. The Lender Isn’t Registered
Have you confirmed the registration number and license details of the lender? Keep in mind that the Federal Trade Commission (FTC) mandates that loan providers register in every state they operate. Every lender needs to procure such a license to operate from the corresponding Attorney General in each respective state. Moreover, you can cross check this with the AG or Department of Financial Regulations in your state as well. No matter what they say, lenders without registration in your state of residence are operating illegally in the eyes of the law.
Watch out for common deceptive excuses like ‘we are not a US loan service’ or ‘we don’t need to register because we operate strictly online’. These are tell-tale signs of fraudulent offerings.
2. Request Upfront Payment
Asking for payments or fees prior to disbursing the loan amount is a personal loan scam by the book. Typically, fraud loan companies that request upfront payment often claim such a fee is compulsory for insurance, or to be used as processing or origination fees. Truth be told, no borrower needs to pre-pay for any personal loan. This is why we recommend ascertaining the loan rates and terms before the contract begins to ensure you’re not getting scammed.
If the lender is responding inadequately to your questions about rates or fees, be on guard. Genuine lenders are proactive about sharing their terms and conditions to eliminate any friction during the underwriting and disbursement of loans after approval.
3. No Credit Check
Every loan and the accompanying terms are subject to your financial history. The biggest red flag is when a personal loan provider claims they don’t need to conduct a credit check prior to disbursing the loan. Another red flag is when borrowers with weaker creditworthiness do not require a co-signer as well. Beware of lenders that ask for your Social Security Number or Bank Account details. Otherwise, your sensitive details will be used to obtain unsolicited fees from your account.
Legitimate lenders are required to do hard credit checks to understand your credit history and obtain your credit score. This is because credit checks are pointers that validate the capability of the borrower to repay the loan, without which the lender wouldn’t know if the borrower is a scammer.
4. The Lender Mails, Calls or Visits You
Steer clear of lenders which send you unsolicited letters, emails with links, call or engage in any type of outreach without your prior consent. We recommend customers of all types to strictly avoid opening emails, attachments, and links from unknown senders.
According to the FTC, lenders are not legally permitted to contact borrowers for promoting their services prior to granting payment. Most scammers who prey on sensitive customers are generally trying to obtain banking details and other personal information to defraud borrowers. Keep in mind that legitimate lenders do not solicit borrowers under any circumstance.
5. The Lender Website URL Does Not Have a Padlock Symbol Visible
Any website that collects or uses confidential details must be protected by HTTPS, which is used to encrypt sensitive information. Without an SSL certificate, every bit of personal information provided to the website can be fraudulently obtained by malicious actors. Fishy loan service websites often duplicate or imitate reputable loan services to the dot but operate via unsecured web addresses simply because an unsecured website is mandatory for scam loan companies to steal sensitive payment information from borrowers.
Moreover, genuine lender websites are not limited to SSL certificates alone. Check whether the loan website you decide to transact with features 128-bit or 256-bit SSL encryption. In addition, Payment Card Industry Data Security Standard (PCI DSS) makes it compulsory for companies accepting credit card payments to feature encryption.
6. The Lender Offers Time-Sensitive Deals to Pressure You
Watch out for countdown deals from fraudulent lenders as there are no urgent offers in the personal loans industry. If the lender is pushing you to ‘act immediately’, find a new debt consolidation loan provider or personal loan issuer given that lenders offer generally aren’t designed to fluctuate. Moreover, legitimate promotions are not exclusive and apply to everyone.
Illicit lenders will push you into making a quick decision because they simply don’t want you to review the fine print of their fishy policies. Because taking a personal loan has long-term repercussions, it is important to scrutinize an offer from every possible angle.
7. The Lender is Untraceable or Without A Physical Address
The first sign of bogus loan service is the lack of contact information on the lender. If you cannot reach them on their specified address or phone, be wary. Watch out for P.O. box addresses as they are probably up to no good. A lack of a genuine address is a common sign of fake loan companies given that borrowers will be unable to reach these firms in case of a discrepancy later.
Moreover, borrowers do not need to dig around for addresses or phone numbers of legitimate lenders as it is typically displayed prominently on their official website. Moreover, you will most likely find pictures and reviews on search engines about the physical location of trustworthy lenders if they have brick and mortar locations. We recommend you always scour the website for information and confirm the authenticity of any lender you intend to select by calling their official number.