Signs of a Personal Loan Scam
Legitimate personal loans are a great way to get funding for unexpected expenses, debt consolidation, major purchases or home upgrades. However, you need to make sure the lender you choose is legitimate and not running a personal loan scam.
Unfortunately, any time large sums of money are involved, the unsavory characters will attempt to make a quick buck at the expense of unsuspecting victims. Thankfully, if you know the signs of a personal loan scam to look for, you can protect yourself and have a great borrowing experience.
Signs of a personal loan scam
Guaranteed approval regardless of your finances
If a personal loan company guarantees that everyone will be approved regardless of their financial situation or creditworthiness, it could be a red flag. There’s nothing wrong with companies that advertise they’re willing to work with less-than-great credit scores, but if they guarantee approval across the board, something is off.
Remember, lenders exist to make money. The only way they can stay profitable is by picking and choosing who they are willing to lend to. If they give money out to everyone regardless of risk, they’ll quickly be out of business. Be wary of any lending companies that seem too eager to approve everyone for a loan.
“The most common personal loan scams that consumers describe to me are the ‘lower your interest rate scams.'” explains Don Petersen, a TCPA and consumer protection lawyer in Florida. “How can anyone possibly be preapproved when everyone who receives the call is told that they are preapproved? It can’t be true.”
The pressure to act fast
Yes, lenders are businesses that make money when they sign contracts. Yes, there is an incentive for these companies to get you onboard with a loan. However, most reputable lenders care about reputation because they know it’s important for long-term survival in the industry.
This means that reputable lenders are not going to pressure you into acting fast on a loan. They won’t use high-pressure sales tactics to scare you into acting quicker than you are comfortable with. If you feel like a lender is putting undue pressure on you to move quickly, walk away. Even if they’re not a personal loan scam, they’re not a lender you want to do business with. You want a lender who has your best interests at the forefront of the decision-making process.
The lender initiates the contact
Most reputable lenders are not out robocalling or sending mass emails to people about personal loans. Unless you’ve contacted the company first or had filled out an online form looking for personal loan offers, you should be wary.
Remember that some pre-qualification forms or interest contact forms online may go to multiple lenders. So, if you fill out some information online and then get contacted by several lenders, they may be legitimate. But if you haven’t reached out to anyone about a personal loan and someone contacts you first, it’s usually a major red flag.
Requiring upfront payment
No reputable personal loan company requires you to pay money upfront. Remember, you are the one looking to borrow money here, not the lender. If you’re required to put money down before signing for your loan, you might be dealing with a scammer. Yes, many lenders do require application fees, appraisal fees, and fees to pull your credit report. But most lenders will roll these charges into your total loan so that you’re not coming out of pocket before you receive your money.
What to do if you think you’ve been scammed
There are not many worse feelings than realizing you may have been the victim of a financial scam. If you fear you have, there are steps you can take. First, contact your bank and cancel any transactions or money transfers heading towards the fraudulent company. Your best bet would be to get in touch with a bank agent on the phone or in-person instead of manually making adjustments online. The agents may have additional options when they learn the nature of the request.
Next, contact the Federal Trade Commission (FTC) to report the scam. As experts in the field, the FTC will be able to give you the best advice to deal with the scam you’re a victim of.
The best advice for dealing with personal loan scams is to act quickly. If you’re able to catch onto the scam quickly enough, you may be able to recover any funds that could be lost by waiting longer. There’s no guarantee, but the sooner you act, the better your odds will be.
Signs of a legitimate personal loan company
The signs of a legitimate personal loan company are the exact opposite of the signs of a personal loan scam. Companies that don’t pressure you to act quickly, that don’t initiate unwanted contact, and that don’t require upfront payment are more likely to be legitimate.
Additionally, household names that you recognize or that have positive reviews from third-party companies are going to be your safest options. The personal lending industry has been around for a long time, and the experts in the field are established. Don’t try and reinvent the process by going with an unknown company just to save a few bucks. If it seems too good to be true, it probably is.
At the end of the day, the person most responsible and most equipped to protect you from personal loan scams is you. By doing your homework, looking out for the signs of a personal loan scam and utilizing the opinions of experts, you can ensure a positive lending experience.