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Six Signs of Personal Loan Scams

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More and more, we’re looking towards personal loans as a way to bring in money for our pressing needs – nearly 24 million Americans have a personal loan as of the second quarter of 2024, up over a million from the same time a year earlier. With rates still remaining high, prospective loan seekers are looking for savings where they can find them – with some looking online for their loans.

Unfortunately, that’s where scammers and fraudsters are lying in wait, hoping to collect your personal information and money to cash in themselves.

Here are some signs to look out for when you’re looking for a personal loan to avoid falling victim to scams and identity theft.

1. Unsolicited loan offers

The main indication that a personal loan offer is possibly a scam is if you receive a phone call, text message, or other direct communication making the offer and you haven’t had any prior contact with the lender. Legitimate lenders rarely engage in unsolicited (cold call) outreach – they normally use traditional methods of marketing their products, relying on consumers to reach out and initiate contact.

If you have any doubts about a communication’s veracity, or how they knew to contact you, don’t trust it. Delete any suspicious text message or social media direct messages, and hang up on robocallers. Even saying “Don’t contact me” is a signal to them that you’re likely to respond, so calls and messages may persist.

2. Unrealistic guarantees of approval for loans

If a lender advertises guaranteed approval, it’s normally an indication that they are either offering subprime loans (loans with higher interest rates and fees than standard loans, given to people who don’t qualify for prime-rate loans), or it’s an outright scam.

Most legitimate lenders will have a list of requirements to meet in order to qualify for a personal loan, including proof of income, minimum credit score threshold, and other information relevant to your ability to pay back the loan.

There are loans available for people with lower credit scores, but they typically have higher interest rates and shorter terms than conventional loans.

3. Pressure to act immediately

A common characteristic of many scammers and fraudsters is to use high-pressure tactics to convince people to make decisions urgently without thinking things through. If they are pushing limited-time offers or threatening consequences if their offer isn’t accepted immediately, they are not a legitimate lender. Look at other options if you don’t feel comfortable with a lender’s proposal.

4. Upfront fees and hidden costs

If you’re approached with unexpected upfront costs, or fees are not clearly stated, be cautious. Legitimate lenders typically don’t require payment to disburse loan funds – rather, they deduct fees from the loan amount they provide you, or include them in the terms for loan repayment.

If your loan requires immediately paying the lender, it’s probably a scam.

5. Lack of physical address or contact information

Even if a lender primarily operates online, they will typically provide a verifiable mailing address as part of their contact information. If you can’t verify a lender’s location with basic online research, or you can’t find viable contact information, you probably shouldn’t do business with them. Scammers often avoid listing physical addresses to maintain anonymity and evade accountability.

6. No registration or license

Lenders must be registered in every state they want to issue loans. A prospective lender may post a license on their website, but if you want to be absolutely sure, you can check with your state’s attorney general’s office or business registration office to confirm a lender’s legitimacy.

What to do if you've been scammed

  • Contact any companies involved (banks, credit cards, etc.)

If you gave any money to a scammer, contact the companies you worked with to make the payment – such as your credit union, credit card company, etc. – as soon as possible. If you can, cancel any payments, and ask for assistance with securing your accounts.

  • File a police report

Once you’ve informed any companies involved, file a report with your local police department. Request a copy of the police report to keep with you as proof of the incident. Try to provide as much detail as you can, including any evidence you have.

  • Monitor your credit

If your personal or financial information was stolen, a scammer could try to access your credit or open accounts in your name. Monitor your credit with a free credit report to make sure this isn’t happening, and contact the three national credit bureaus (Experian, Equifax, and TransUnion) to place a fraud alert on your reports.

  • File a report with the Federal Trade Commission

In addition to your local law enforcement agency, you can also report scammers to the Federal Trade Commission. They track and investigate scams, and can provide personalized tips for responding once you submit your report.

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