3 personal loan scams to avoid

1. Personal loans without credit check

No credit check loans are attractive to borrowers with poor credit who may find it difficult to obtain loans from legitimate companies. Some are so relieved to find a company willing to work with them without questioning their background that they don’t do their due diligence before signing up. It is only after they hand over their personal information and possibly a fee to the scammer and never receive the promised funds that they realize their mistake.

All lenders assess your credit when you apply for a loan. Some legitimate lenders offer loans to borrowers with poor credit, but they still perform a credit check and use it to determine your interest rate.

Instead of falling for this scam, search for loans with bad credit or follow our guide to applying for a loan without credit. You can also try applying for a secured credit card.

If you come across a lender offering a personal loan without a credit check, avoid it.

2. Personal Loans with Upfront Fees or Collateral Requirements

Legitimate personal loan providers charge an origination fee, which is a small percentage of your loan balance. But these fees are paid on the amount of the loan – you don’t actually get the full amount you borrowed, but you also don’t need to write a check to the lender to receive your funds.

Some scammers capitalize on the fact that not everyone knows this by asking victims to send money as a setup, request, or processing fee. before the “lender” will release their funds to them. The scammer takes that money and disappears before you realize what happened.

3. Unsolicited personal loan offers

You may receive legitimate personal loan offers in the mail, especially if you have applied for a personal loan in the past. But scammers can also throw their letters into the mix, hoping you’ll mistake them for a real business. They may also contact you by phone or email, and daring scammers may even show up at your doorstep selling the lie.

No real personal loan company contacts you in this way with unsolicited offers, so it’s a pretty sure sign of a scam. Other things to look out for are links to fake websites, requests for personal information, high pressure sales tactics, and grammar and spelling errors in any materials you receive.

What to do if you think you’ve been the victim of a personal loan scam

If a personal loan offer sets off alarm bells in your head, there’s probably a good reason. Do not turn over any money or personal information to the company until you have taken steps to verify the company’s reputation.

First, check to see if the company is registered to do business in your state by contacting your state attorney general’s office. The Federal Trade Commission (FTC) requires all legitimate lenders to be licensed in every state they do business in, so if there is no license in your state, that’s a sure sign you’re dealing with a scam.

You should also check the company’s website. All websites that request financial information must be secure to prevent hackers from stealing it. You can tell if a site is legit by looking for “https” at the beginning of its URL. If the “s” is missing, it’s a sign that the company isn’t taking steps to protect your financial information, and you shouldn’t work with them.

Also do an online search for the business to see if any negative information pops up and try to find an address for the business. A missing address is another red flag. Some scammers claim to be working with a legitimate company, so compare the emails, websites, and phone numbers the scammer gives you with those that show up when you search the internet.

If you come across a scam, report the company to FTC, your state’s attorney general’s office, and your local police. Give them as much information as possible about the scammer, including the name they used, the phone number they used, and copies of any correspondence you received from them. This helps these agencies track down the scammer and prevent them from hurting other people in the future.

What to do if you are the victim of a personal loan scam

If you are a victim of a personal loan scam, you should still report the scammer to the agencies listed above. Some people are reluctant to admit to having fallen for a scam. But by refusing to report it, thousands of other people risk falling into the same trap.

You should also protect your financial information if you gave any to the scammer. Pull your credit reports and check for any unusual accounts or activity that you don’t recognize. If you see any, notify the financial institution and credit bureau and place a fraud alert on your account so lenders know to take extra steps to verify your identity before opening a new credit account in your name.

You may not get your money back, but you can avoid losing even more money by following the steps above. Personal loan scammers will never rest, but if you master their tricks, you can prevent yourself and possibly even your family and friends from suffering financial loss from them.

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