Loan Scams and How to Prevent Them
The Covid-19 crisis had disastrous economic repercussions. Due to the financial crisis, lending frauds expanded in number and became more prevalent than they had been previously. To steal from you, scam lenders use a variety of strategies, and recognising them demands a keen eye and an inquisitive mind. The growth of scammers in the sector has also been facilitated by an increase in online lenders.
SACCOs (Savings and Credit Co-Operative Societies), credit unions, banks, and trustworthy online lenders are examples of respectable lenders. You can check out the Scam Detector’s recognised partners, Ideal Loan, Sweet Loans, and Cash For 2022 if you’re looking for reputable lenders before we discuss the telltale symptoms of a loan shark.
Let’s move on.
How to Spot Loan Scammers
Without ever intending to give you a loan, a loan scammer generates money by making false loan proposals to you, collecting loan fees from you, and obtaining sensitive personal data from you. Since some lenders promise you a loan without running a credit check, you can fall for a lending scam. Other lenders may make you an upfront loan offer, demand fees or security, and then disappear.
While con artists adapt, it is a well-known fact that while things change, they also tend to stay the same. What similarities exist among financial scams?
1. Lenders Who Make Direct Contact with You
Genuine lenders might get in touch with you. Real lenders, on the other hand, get in touch with you based on your credit history, whereas a scammer might get in touch with you and ask for your personal information to access your accounts.
Searching through the lender’s registration with the state’s attorney general’s office is a secure way to find a reliable lender. The loan pitch is another approach to spotting a con artist. A con artist could promise you permission without running a background check, be evasive about fees, and make you feel as though no lending criteria exist.
2. Lenders who push you to take out a loan
You can receive loan offers that have expired. Applications for loans that feel urgent or have short expiration dates are very frequently scams. Consistent loan offers from a reliable lender will be made depending on things like current lending rates and creditworthiness. Genuine lenders may waive fees, but these waivers have no impact on the terms of the loan or the interest rate.
Be wary of lenders who provide you with a time-barred low-interest rate. Such lenders are probably con artists.
3. There are no guarantees that the lender will receive their money back.
No business-minded lender will give you money if you don’t have a solid plan for recovering your investment plus interest. A con artist will have special ludicrous loan requirements, such as:
It’s highly likely that a lender won’t check your credit if they say they do. Credit checks give lenders information about the risk you pose to the company, thus having a low credit score almost ensures high-interest rates. Even if the loan is intended for borrowers with bad credit, reputable lenders verify the credit of every prospective borrower.
A lender who promises loan approval with no criteria could be a swindler as well. Guaranteed approval tags and similar language should be avoided. Another common scam tactic used by con artists is to purposefully be ambiguous about loan fees before revealing them after the loan has been approved, in an effort to put you under pressure to sign the loan documents. A trustworthy lender will disclose all costs and be open and honest about the loan application procedure.
4. There is No Physical Address for the Lender
Everyone who lends money has a physical location, including internet lenders. A trustworthy lender has a staff roster and an actual mailing address. A physical location allows for accountability and makes it possible to get in touch with the lender in the event that legal action is required. A lender who doesn’t have a real location you can go to is almost always a con artist.
An unregistered lender is also more likely to be dishonest. Every lender must be registered with the attorney general according to the law. Registration is a screening procedure that a con artist might not be eager to go through. Visit the attorney general’s website before providing any lenders with sensitive information.
5. Loan companies without secure websites
Large volumes of highly sensitive personal data are handled by lenders. Such websites have Secure Sockets Layer (SSL) certifications as a result. The webpage of a fraudulent lender may begin with “HTTP” rather than “HTTPS.” These small discrepancies ought to alert you to the need for extra caution when working with such a lender.
How to Avoid Scammers
Even while it could be simple to spot a con when they contact you, you should also learn how to avoid being conned. This entails:
Checking online and reading online reviews.
- See how the lender is rated by the Better Business Bureau.
- Verify the lender’s state registration.
- Before making any financial decisions, consult a reliable source.
- Dealing with reputable lenders like banks, credit unions like the Space Coast Credit Union, and SACCOs lowers your risk of being taken advantage of. Instead of putting your belief in some dubious lenders who promise inexpensive credit, it would be great if you tried to compare loans using different web tools to find cheaper loans.
If you think a lender is dishonest, try to report them to the relevant regulatory body in your state. Your alertness and patience will prove to be trustworthy virtues in preventing fraud, all things considered.
Numerous con artists are proposing false deals. Lenders who urge you into taking a loan, promise extremely low-interest rates or lack a physical address should raise red flags. Your first objective when looking for credit should be to recognise frauds and stay away from them. Don’t be fooled by “too good to be true” promises; credit unions like the Space Coast Credit Union give members access to affordable loans and low-interest rates.
A Lending Scammer’s Reporting Procedure
Share this article on social media to alert your family and friends of these lending frauds. Using the following link, you can formally report the fraudsters and any other suspect loan behaviour to the Federal Trade Commission:
Report Here To The FTC
How to better protect yourself
You may sign up for the Scam Detector email here if you want to be the first to learn about the most well-known scams every week. We’ll send you emails from time to time, but we won’t spam you.
While you wait, read some of the articles about lending fraud just below this one to educate yourself. Last but not least, please feel free to disclose additional financial con artists in the comments area below.
