Personal loans can be great for medical emergencies, consolidating debt, home improvement projects, and a variety of unexpected expenses.
Because of the popularity of personal loans, there are predators out there who want to take advantage of you with various methods of loan fraud. In fact, 2019 saw an increase of fraud from an already rampant surge of fraud, identity theft, and other cases of financial scamming in 2018.
To prevent this from happening to you, it’s important to notice the warning signs, be aware of what types of scams these criminals need your information for, know how to make sure a loan company is legitimate, and finally, know what to do in the instance you are a victim of personal loan fraud.
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Warning Signs of Personal Loan Fraud
Many loan scams can be detected very early on. There may be several warning signs to tip you off that a personal loan company does not have your best interest in mind. If you notice any of the following red flags when negotiating a personal loan, you may want to reconsider your options.
Too Good to Be True
Personal loans are no small matter. Your bank or lender will have you meet several requirements before advancing you a loan. If a new bank or lender contacts you without asking what you’ll use the money for, without conducting a credit check, or without asking for money down, it could be signs of a scam.
Other signs that the loan may be too good to be true could be the promise of a considerable loan with a no-to-low interest rate, or a grandiose sweepstakes bonus, with no concern for a prequalification process. You can get a loan with bad or no credit, it’s just a matter of going through the proper channels.
No Credit Check
When a lender is determining whether they want to extend you a loan, they’ll likely check your financial history to see if the loan will be paid back. If you’ve been pre-approved, guaranteed approval, and/or no credit check is required, this should raise suspicion. If “bad credit is no problem” for a sizable loan, you should be wary as well.
Out of Pocket Upfront Fee
It is common for lenders to charge an origination fee. However, this fee will come out of your loan and never out of pocket. Illegitimate lenders may use permissible language — calling it an “application” or “processing fee” — and may even ask you to purchase a prepaid credit card or ask for your debit/credit card information as collateral. This should raise an eyebrow, as a legitimate lender would never ask for these things, and would include any fee into the loan’s principal.
No Physical Address for Lending Company
If you aren’t familiar with a potential lender, it is best to look them up and vet them. If there is no company information — phone number, address, or other contact information — this could be a clear sign of a scammer.
Additionally, it may be a good idea to read reviews (if there are any) of the lender to see what other people say about them. If you don’t find any information on a lender’s website, you may want to reconsider giving them your personal information.
If you get an email out of nowhere from a lender who promises you anything, you should be very skeptical. Phishy emails are also dangerous because they can prompt you to click on a link to a website. This website can then download malware onto your personal device, and personal information can be stolen through this process.
This is a common cause of identity theft, and you should never click on these links. Finally, take the time to observe the email address the “loan offer” is coming from. Many times, you can tell that the email is coming from a scammer. For instance, the email could say it’s coming from your bank, but if the email address does not say @[your bank], or doesn’t have the official letterhead of your bank, do not give the lender your personal information.
Misspellings and Grammatical Errors
Though these mistakes are typically associated with emails, letters can include misspelled words, and have weird grammatical errors. This may be because many loan scams are initiated outside of the U.S., and English is not the primary language.
Additionally, scammers are more about quantity than quality. The hastily written letters and emails are sent to (tens of) thousands of people in the hopes that even one person will respond (or click on a link in the email). Remember, professional lenders will take the time to carefully craft a letter or email, as they have a stake in extending a legitimate loan to you.
You Feel Pressured
Many people may feel compelled to accept a loan or give out their personal information because the “lender” tells you to “act immediately,” or the offer will expire. A creditable lender will never pressure you in any way to give out your personal information or to rush into a loan.
Common Loan Scams
Your personal information can be used to carry out a wide variety of scams. Other times, a scammer may just be after a prepaid credit card or pocketing an “upfront fee” for themselves. Scammers use the methods above to obtain the information they need to carry out the following scams.
- Student loan scams;
- Credit repair scams;
- Debt relief scams;
- Reverse mortgage scams;
- Easy money scams: These scams include cashier’s check, investment, lottery scams, and more.
All scams are born out of getting you to divulge your personal information (or clicking a link in an email to obtain your information through malware). This is why it’s so vital to catch the perpetrator before disclosing any of your information. However, criminals are relentless and the threat of a scam is always looming.
What to Do if You’ve Been Scammed
It is unfortunate, but scams are carried out — in large numbers. In 2019, more than 3.2 million incidents of fraud were reported to the Federal Trade Commission (FTC). If you find that you or someone you know has fallen victim to fraud, there are several measures you can take in going forward with financially recovering.
- File a report with the FTC and/or the Internet Crime Complaint Center: This can alert the different agencies of suspicious activity, and can potentially pinpoint the attacker(s).
- Notify your bank: To prevent further damage and possibly receive reimbursement, it is a good idea to tell your bank that you have not authorized the fraudulent purchases. The bank can then freeze your credit card until you both get the issue figured out.
Personal loan fraud can ruin your finances. Knowing if someone might be scamming you can stop them in their tracks. Locating the criminals who carry out these scams is extremely difficult, but stopping them from the get-go can deter them from carrying out other cybercrimes.
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