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fizkes/Shutterstock August 09, 2022 Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Bankrate logo The Bankrate promise
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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo Editorial integrity
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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. Consumers lost nearly $3.3 billion collectively to fraudulent practices in 2020, according to the Federal Trade Commission. Potential fraudsters pounce on those who are most in need or the most likely to accept a fake offer. If you’re not careful, you might find yourself on the receiving end of a personal loan scam where you could potentially lose money. You can learn how to check if a loan company is legitimate and avoid being a victim of fraud. Here are common signs of a potential loan scam. Get pre-qualified
1 The lender guarantees approval
Truly reputable lenders make it clear that they’ll need to look at your credit, sometimes getting reports from all three major credit bureaus (Equifax, TransUnion and Experian). Most lenders need to know whether you have a on time and in full to make sure you’ll be diligent about repaying a loan. Fraudulent businesses aren’t interested in your creditworthiness. They tend to seek high-risk borrowers who are likely to fall behind on loan payments and incur excessively high late fees and penalties. Steer clear of any lender that guarantees approval or makes claims like: “Everyone is approved!” “We don’t care about your past. You deserve a loan!” “Bad credit or no credit? No problem.” Some reputable lenders offer . These lenders consider more than your credit score when determining your eligibility. However, these lenders will still typically ask for your income, employment information and education background before offering you a loan. Lightbulb Takeaway Make sure you’re working with a lender interested in your previous financial history, even if it isn’t all that great.
2 The lender isn t registered in your state
The Federal Trade Commission (FTC) requires lenders and loan brokers to register in the states where they conduct business. Check the lender’s website to verify the list of states where it legally conducts business. If a lender you’re interested in does not list registered states, you could be dealing with a loan scam. Checking registration is a key step to ensure that you’re dealing with a reputable company, separating the frauds from legitimate businesses. Lightbulb Takeaway Verify lenders are registered in your state before sending over banking and personal details. If they don’t operate in your state, they don’t have the authority to loan you money. 3 The lender demands a prepaid card or other payment upfront
Some scammers have been known to require prepaid debit cards, gift cards or banking information from borrowers. Generally, the scammers claim they need the information for insurance, collateral or fees. This is a scam. Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but those charges are deducted from your loan. A prepaid card is a big red flag. It’s virtually as untraceable as cash, and you won’t be able to report it as stolen if you’ve given it to a lender. If you provide your banking credentials, it’s possible to file a dispute with your bank or credit union, but it could take some time for your claim to be investigated. Furthermore, you may not recoup the funds that are stolen from you. Lightbulb Takeaway A reputable lender won’t require money upfront to receive your loan proceeds. When the loan is funded, you should accept a wire transfer, direct deposit, or a check you can deposit into your checking account. 4 The lender calls writes or knocks
If you get a loan offer by phone, through the mail or even through a door-to-door solicitation, be on your guard. According to the FTC, it’s for companies to offer a loan in the U.S. over the phone and ask you to pay before they deliver. It’s a violation of The Telemarketing Sales Rule. However, it’s not illegal for lenders to send out general advertisements to consumers via email. Some scammers go to great lengths to steal from consumers, including using a legitimate lender’s name. It’s also not uncommon for scammers to swap out the name and number that shows on your caller ID to trick you into believing they’re the real deal, the FTC notes. You can protect yourself by ignoring solicitations and contacting the lender directly via their secured website or by calling the online customer service hotline. If the lender has no record of reaching out to you, that’s your confirmation that you were dealing with a scam artist. Lightbulb Takeaway A reputable lender will not target you over the phone, through direct mail or door-to-door solicitation. Look for lenders that advertise through traditional online and mass media. 5 The lender has no physical address
Every lender you’re interested in should provide a physical location. Run it through Google Maps just in case. Some businesses running personal loan scams will list addresses that are actually vacant lots, so it’s important to verify this. Avoid the lender if you don’t find any sign of a physical address. Many fraudulent businesses are untraceable so they can avoid legal consequences. Lightbulb Takeaway Don’t do business with a company that cannot provide a physical address, and always verify that the address is legitimate before you proceed. 6 The lender pressures you to act immediately
Don’t fall for the urgency plea. One of the hallmarks of personal loan scams is giving you an immediate deadline to sign on for a loan because the offer expires quickly — like within a day. Or the lender could communicate that something bad is about to happen, like revoking your driver’s license or a lawsuit filing, if you hang up without acting fast. Lenders that use such high-pressure tactics could be up to no good. It may be a ploy to get you to make a rash decision without having time to do your research to uncover the scam they’re running. Lightbulb Takeaway Avoid offers with immediate deadlines for you to make a choice. You should have days and possibly weeks to accept a loan offer. 7 The lender is not transparent about its fees
Scammers will avoid posting their fees prominently on their websites or disclosing them when asked. They may also tell you that you’ve been approved for a loan and then demand a fee from you upfront. While some reputable lenders do not list their fees on their websites, fees should be disclosed during the application process and before you sign anything. Hidden fees that are imposed after loan approval are a red flag. The FTC suggests that you walk away from any company that follows this practice, particularly if you’re told that the up-front money is for such things as “processing,” “insurance,” or “paperwork.” Lightbulb Takeaway Legitimate lenders may charge application, credit report or appraisal fees, which you’ll be aware of before you complete an application since real lenders make you aware of these fees. If there are surprise fees you weren’t aware of, it could be a scam. 8 It sounds too good to be true
The reality is if a personal loan offer sounds too good to be true, it probably is. Legitimate lenders won’t just call you out of the blue with an irresistible loan offer. You likely won’t qualify for a loan with an unbelievably low rate without having to apply and undergo a hard credit pull. Lightbulb Takeaway No matter how good a personal loan offer sounds, if it sounds like a scam, it most likely is. Common types of loan scams
Most types of loan scams seek to either extract money upfront or provide loan terms so unforgiving that borrowers will be subject to late fees or other charges. Some popular ones are: Loan fee scam: Scammers may try to offer you a low-cost loan in exchange for hundreds or thousands of dollars of fees up front. After receiving these fees, they will cut off contact without providing any funds. No-credit-check scam: Some legitimate personal loan lenders consider more than your credit score when approving you for a loan, but some scammers promise funds without a credit check. This is a red flag since your credit history is a major factor in assessing how risky of a borrower you are. Private student loan forgiveness scam: The federal government offers student loan forgiveness programs for federal student loans. If a company approaches you promising to forgive your private student loans, it’s likely a scam. Debt consolidation scam: can help you streamline the process of repaying your debt and can save you money in the long run. If a debt consolidation company is being pushy or tells you to cease contact with your creditors, chances are it’s trying to scam you. Who is most at risk for a loan scam
Scammers target people who are unsuspecting or may have trouble getting a loan through conventional means. Borrowers with a lot of debt, the elderly and people with bad credit are most at risk for these scams. For instance, no-credit-check and payday loans may be particularly attractive to people with poor credit, since from reputable lenders may come with high interest rates. Unfortunately, some scammers purchase lists of individuals who have searched or applied for these types of loan products online as they’re an easy target. If you fall into a high-risk category, stay vigilant about any company that advertises a loan product that seems too good to be true for your situation. If in doubt, check that the company is licensed in your state or contact your state’s attorney general. What to do if you think you ve been scammed
While no one wants to think that they’ve been a victim of fraud, it can and does happen. The good news is that there are several steps you can take if you’ve been targeted, like: Gather your documentation. If you have emails, screenshots or other documentation that will help your case, gather them to present to authorities when it’s time to contact them. Contact your local law enforcement. By filling out a police report, you’ll have an official record. Contact agencies specializing in oversight. After calling law enforcement, it’s time to contact , the FBI, and the . With this information, these agencies can better serve and protect other consumers. Talk about it with family and friends. As scammers evolve their tactics, it’s important to help others stay informed. Place a fraud alert with one of the major credit bureaus. If you place an alert with Equifax, Experian or TransUnion, the alert will be posted with all three. A fraud alert isn’t a credit freeze; instead, it lets creditors know you may be a victim of fraud and that they should contact you to verify your identity before issuing new credit. How to spot a legitimate loan company
Even if you have below-average credit, many companies offer legitimate loans you could be eligible for. When , start with these steps: Check for contact information. A lender’s phone number, email address and physical address should be readily available on the website, even if it’s an online-only lender. Investigate online reviews. Customers posting on Google and Yelp will have the best insight into the experience of working with a lender. Make sure it’s registered. Legitimate lenders must register with state agencies before giving out loans. Contact your state’s attorney general if you’re unsure if a lender is safe. The bottom line
If you need a personal loan, research and compare multiple lenders to ensure you’re getting a good rate from a trusted source. Even if you don’t have great credit, plenty of personal loan lenders offer loans to borrowers in need regardless of credit status. Don’t be duped into falling for a scam. Instead, find a company willing to work with you where you are. Get pre-qualified
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SHARE: Aylea Wilkins is an editor specializing in personal and home equity loans. She has previously worked for Bankrate editing content about auto, home and life insurance. She has been editing professionally for nearly a decade in a variety of fields with a primary focus on helping people make financial and purchasing decisions with confidence by providing clear and unbiased information. Related Articles