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A personal loan is a great way to consolidate debt and make major purchases. You just need to borrow a certain amount of money and repay it with interest top on it in the given period.
Despite its easy availability and usefulness, some companies lure consumers with their fraudulent practices. As per Federal Trade Commission, consumers lost $3.3 billion in 2020 because of personal loan scams.
If you are also looking for a personal loan for debt consolidation or medical bill payment, then you need to look out these 10 red flags before signing for a loan.
Personal Loan Scams
No matter whether you are seeking out a personal loan to pay off medical bills, consolidate debt or upgrade your house, understanding how scammers trick consumers is very important.
Fake companies hunt consumers who latch onto a no-credit-check loan or a guaranteed loan. Since the consumers rush a lot, they fall prey to fraudulent personal loans.
Personal loan scams are initiated by online businesses that have no physical identity or address. But this doesn’t imply all online lenders are scammers. So, you need to look for warning signs before signing any paperwork.
Types of Personal Loan Frauds
Social media messages and phone calls are the most common ways for a scammer to get in touch with potential victims. If you are asked to pay some fee before receiving funds or fill in personal information on an unsecured site, you might be facing a loan scam.
Advance Fee Scams
Immediately put a brake on your application if your lender asks for an upfront fee. Some loan providers charge an origination fee for a loan but the fee is always deducted from the loan amount and never out of pocket.
In such scams, you might get a phone call for confirmation of a loan which is nothing but loan scams over the phone. The lender just wants to know your bank account number or password to steal the money.
10 Loan Scam Alerts
1. Loan is Guaranteed
If the loan provider tells you, you are guaranteed to get a personal loan, then you need to consider this statement twice. It’s because reputable lenders look into your financial history to ensure you will pay the loan back or not.
2. Lender Don’t Check Your Credit
Trustworthy lenders always look at your credit report before accepting the loan application. However, scammers avoid looking for a credit report. They offer you the loan even if your credit score is low.
3. Lender is Unauthorized
Before running a business, every legitimate lender has to register in their respective state. If it isn’t the case, you are probably taking a loan from an unauthorized lender.
4. Lender With No Physical Address
Before you work out with a lender, it’s important to look up the lender’s physical location. Expert money scammers provide a P.O. Box instead of a physical address. So, be aware of that.
5. Offer Loan Via Phone or Mail
You won’t see real lenders knocking on your doors. Instead, they will be using online resources to get you. However, if someone offers you a loan over the phone, it’s just part of online loan scams.
6. Unsecured Lender’s Website
If you are signing for a personal loan, always look for two things: a padlock next to the domain and “HTTPS” If that’s not the case, avoid filling your personal information in it.
7. Makes You Use Prepaid Card
Personal loan scammers consider non-traceable forms of payment. Hence, you should avoid accepting the prepaid card or pay a person directly.
8. Lender is Vague
If a lender is not disclosing everything related to the loan, including the charges, then you should consider it a sign of fraud.
9. You Are Pressurized
If the loan provider pressurized you to make the decision right away by saying the deal will expire in the next 24 hours, you should avoid the offer.
10. Pay Upfront To Lender
If the lender asks you to make payment before receiving the personal loan, then it comes under a personal loan scam.
These are the most common warning signs of personal loan scams you must be aware of.