When you need a personal loan, it is important to shop around for one that will not only meet your needs – but that comes with the added benefits of a low-interest rate, minimal fees, and repayment terms you can afford. The good news is loan providers are far from short in supply, so finding plenty of options should not be a problem. However, there are also plenty of illegitimate companies out there that prey on the unsuspecting consumer in need of money. In your search for a personal loan, beware of the online scam. This is a problem that has become especially widespread in light of the COVID-19 pandemic.
How do you know if a personal loan option is legit? There is a wise adage that goes something like this: if it seems too good to be true, it probably is. Keep this in mind as you explore your option and watch out for these common scams:
The loan that does not consider your credit
While it may seem like a great option for consumers that have less than stellar credit scores, these “loan providers” are often just scammers who will gladly accept your personal information, maybe even collect some fees, but never deliver the money you need. If a loan provider does not check your credit before agreeing to loan you money, you can safely assume it is a scam or illegitimate business.
As part of the loan application process, legitimate loan providers will evaluate the borrower’s credit history and score to determine what kind of repayment terms the provider can offer. If your credit is not great, do not be discouraged. Rather than becoming a victim to a predatory lending scheme or online loan scam, be patient and diligent in finding a loan provider that will help you build your credit with an honest loan under affordable terms, instead of risking a loan from a crook that will steal your personal information or money.
The loan that costs you money
The whole point of a loan is to borrow the money you need. Sure, you can expect interest to accrue on the balance and there may be nominal fees associated with the loan, but watch out for loans that ask for money with your loan application. Origination fees are standard with many legitimate personal loans. A small percentage of the loan balance is paid as fees from the loan amount, so the consumer does not receive the full amount borrowed. However, loan scammers may prey on unsuspecting consumers by demanding an upfront fee for the application, as a processing fee, or for origination.
If a loan provider asks for you to pay them money before you are given access to borrowed funds, it is most likely a scam. Chances are high that any upfront payments from the consumer will be taken by the illegitimate loan provider – without the consumer ever seeing a dime of the loan they sought.
The loan you did not ask for
You are surfing social media or browsing through your favorite online shopping store, and it happens. A flashy pop-up practically leaping off the page of your web browser, “You’re approved!” This is one of those situations where you need to remember the whole “too good to be true” concept. Sure, there are cookies and other tools that companies use to track consumer activity online, but any pop-up ad approving you for a personal loan is almost definitely a scam. No legitimate company is going to loan you money without knowing your credit history – it is too risky.
Unless there is a way to remove the risk. Maybe that pop-up message is true. There may be a loan provider out there willing to loan anyone money, regardless of credit history, but rest assured the terms are unreasonable, with high stakes and it will cost you a fortune to borrow that money. This is a prime example of predatory lending, as most of these loan operations charge excessive fees, high-interest rates, and demand an impossible repayment schedule. A good rule of thumb to avoid falling victim to this scam is to only accept a loan you actually applied for – that you sought out, not that was presented to you without inquiry.
The loan from somewhere else
Before you apply for or accept a loan, do your research on the lender. If the loan provider is located in a foreign country, be cautious. Just because a lender is located in Canada or the Caribbean does not automatically mean it is illegitimate, but there are a significant number of loan scams based in these locations. Before you provide anyone with your personal information or accept money from any lender, it is wise to spend a little time looking into where your money is coming from, what kind of reputation the business has, and make sure you are not setting yourself up for a loss.
The loan provider with bad grammar
Whether you are preyed on with a pop-up ad, a personalized e-mail, or if you just stumbled across a website in your search for a legitimate loan provider, any kind of spelling, punctuation, or other grammatical errors should be a huge red flag. What kind of legitimate business is going to allow this kind of unprofessional representation? If there are typographical, grammatical, or word usage errors on their website or in their correspondence, consider a different loan provider.
Think you have been scammed by an illegitimate loan provider? Report the company to the Federal Trade Commission, the Attorney General in your state, and also contact local police. While you may not recover any of the money you lost, and though you will likely have to put in the leg work to recover any personal information lost, you can help protect someone else from being a victim of this scam in the future.
Reach out to a financial advisor if you need assistance in reducing your monthly debt payments or if you’d like a (reputable) professional to guide you through the process of debt consolidation.
