5 Ways To Spot Personal Loan Fraud


Learn how to spot personal loan scams to prevent fraudulent companies from taking your hard-earned money. (iStock)

In 2020 there were 99,667 reports of identity theft in business and personal loans, according to the Federal Trade Commission. This corresponds to an increase of 127% compared to the previous year. If you don’t see the personal loan scam warning sign and fall into the trap of a fraudster, your identity could be stolen. In addition, the scammer can take some of your hard-earned money. In addition to taking your money, the scammer could hit you with identity theft, potentially leaving you with poor credit

One way to avoid falling victim to personal loan fraud is to compare quotes from multiple legitimate lenders through a lender’s website or other secure method to find the loan best personally Finances Loans for your needs.

To avoid getting scammed by fraudulent lenders, here is how to identify some general warning signs of a personal loan fraud. If you are looking for a reputable lender, visit one Online marketplace like Credible to explore personal loan options.


How to Avoid Personal Loan Fraud

To help prevent personal loan fraud, keep an eye out for these five warnings:

  1. The lender guaranteed approval
  2. Upfront fees
  3. The lender offers you a loan over the phone
  4. The lender is not registered in your state
  5. The lender wants you to transfer money or use a prepaid credit card

1. The lender guaranteed the loan approval

Before a loan is approved, a lender will usually review key factors such as your debt-to-income ratio, creditworthiness, and income. In this way, it can assess the likelihood of loan repayment or higher loan rates for those with poor credit scores – those with better credit scores will qualify for a better interest rate.

If a lending company tells you that they guarantee loan approval without going through this process, it is a sign that the lending company is fraudulent. Legitimate personal loan financial institutions, including those offering bad credit loans, typically have a credit screening process to confirm your income and creditworthiness.

2. Upfront Fees

Although some financial institutions may charge you application or loan application fees, these fees are usually deducted from the loan amount. In addition, lenders do not charge a commitment fee to verify your rates. If a lender charges an upfront fee, it could be a loan fraud.

When you are considering a personal loan or want to take out a loan Second personal loan, you can visit Credible to compare lending rates and lenders.

3. The lender offers you a loan over the phone

It is illegal for a lender to offer you a loan over the phone. When a lender does this, it is definitely a sign that you should be running.


4. The lender is not registered in your state

Lenders must be registered in each state in which they do business. To make sure you avoid personal loan scams, check with the state attorney general’s office to see if they are registered.

5. The lender wants you to transfer money or use a prepaid credit card

Legitimate personal loan lenders do not ask borrowers to transfer funds or use prepaid credit cards. If a lender insists you do any of these, don’t do it. The lender is most likely trying to steal your money.

How do you know if a personal loan company is reputable?

In addition to registering a lender in your state, there are three factors you should focus on in determining whether a lending company is legitimate:

  1. Physical address: A lender who does not have a physical address or who uses a PO Box for an address is a lender that you should treat with suspicion. Legitimate companies will display their physical address somewhere on their websites.
  2. Secured website: If the lender’s website is not secured, it could be a sign that the company is fake. You can see if a website is secure by looking for the padlock next to where the website is entered in your browser.
  3. Better business office: You can use the Better Business Bureau to review a lender. If the lender is not listed or has few reviews, it could be a fake company.

To learn more, visit Credible speaking to an experienced loan officer and get answers to your personal credit questions.

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What should i do if i am betrayed?

If you accidentally applied for a personal loan from a fraudulent lender, here are four steps you can take:

  1. Call your local law enforcement agency to file a complaint
  2. File a complaint with the Better Business Bureau
  3. Report to the FTC or the Consumer Protection Office
  4. Try to get back the lost money by contacting your bank or credit card company

The bottom line

To avoid personal loan fraud, watch out for the common red flags described in this article. Ignore lenders who guarantee approval, offer credit over the phone, or ask you to transfer money to them. Once you have found a reputable lender, you can focus on more important things, such as what you can use your personal loan for.

If you want to speed up the process of finding a reputable lender, visit Credible for that best personal loan rates.

Do you have a finance-related question but don’t know who to contact? Send an email to the credible money expert at [email protected] and your question could be answered by Credible in our Money Expert section.


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