7 Ways To Spot A Loan Scam
And the few that are will do so only with very unforgiving terms.
Then, miraculously, you find it: an ad for an easy loan with great terms that will qualify almost anyone. Best of all, the company is willing to work with borrowers regardless of their financial state. Finally – a way out! It’s the answer you’ve been waiting for. A dream come true.
Or is it?
Most successful scams prey on desperate and vulnerable victims. Loan scams are no exception: They specifically target people who are in dire straits and may be willing do anything to get their hands on some cash.But sadly, falling prey to a loan scam will only pull the borrower deeper into the pit of debt.
Once a loan scammer has snagged a victim, they will begin the process of having the borrower fill out a loan “application.” The victim, eager to get that quick money, willingly shares anything asked of them, including sensitive and personal information. With that info in hand, the scammer can make off with these details and empty the victim’s accounts, charge a shopping spree on the victim’s cards or even steal the victim’s identity.
Sometimes, the scammer may ask for an upfront debit card payment as collateral or insurance for the loan. Obviously, the victim will never see that money again.
Awareness and caution are the best defense. Here’s 7 proven ways to spot a loan scam:
1.) There’s no credit check
Every reputable lender, whether they’re affiliated with a credit union, a car dealership or an online institution, will want to verify that the borrower can, and will, repay the loan before they agree to the transaction. If a lender doesn’t bother checking your credit score and history, you can be sure they have no intention of lending you a dime.
The single exception to this rule is payday loans. Since these have such short terms and extraordinarily high interest rates, lenders don’t bother with credit checks. They still make money even if borrowers occasionally default on their loans.
2.) You’re asked to pay an upfront fee
You shouldn’t have to pay for a loan. When a lender asks you to pay a loan collateral, insurance or fees by prepaid debit card or wire transfer, you’re being scammed! Back out of the deal before it’s too late.
3.) The lender isn’t registered in your state
As per the Federal Trade Commission (FTC), every lender and loan broker must be officially registered in the states where they conduct business. A legitimate lender will have a list of states posted on their site to let borrowers know where they’re registered. If you can’t find this information on the site, and the lender refuses to provide further details, they are likely not legitimate.
4.) The lender is not affiliated with any financial institution
Authentic lenders must operate under a bank or credit union charter. This information should be clearly posted on the lender’s site. If it’s missing, you might be dealing with a scammer.
5.) You’re (sometimes strongly) urged to act immediately
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