How to Spot a Scam When You Borrow Money Online
Loan scams are a never-ending battle. A criminal willing to steal your financial good name has no scruples. They are ready to trick you at any time, anywhere, even if you’ve fallen on hard times and are trying to borrow money.
Borrowers are prime targets for fraud since many are so desperate to solve their financial problems that they overlook some red flags. Unfortunately, these red flags are less vibrant each year as scammers refine their methods and get better at tricking you into sharing personal information.
Finding legitimate online loan companies can be challenging, but only if you don’t know what to look for. This article is here to help exposing financial scams. Keep scrolling to learn about the red flags that expose scammers for the con artists they are.
For starters, watch the video below to see some loan scam warning signs:
Are Online Loans Safe?
Let’s address the elephant in the room. Are online loans legit? Yes, personal loans and lines of credit received online are just like the loans you receive from a bank in person.
As long as you work with legitimate online loan companies, online loans have the same rules, regulations, and security as any personal loan. The usual lending laws apply to these options and privacy legislation to ensure lenders collect and dispose of your personal information safely.
The only difference is that you apply for them entirely online using a virtual application you can access by phone or computer. You also receive your funds as a direct deposit loan with the option to repay your loan via automatic transfers.
What Are the Signs of a Possible Scam?
Loan fraud can be problematic as a concept. Without a solid basis in financial literacy, you might think falling for a scam is inevitable. But don’t worry — the cons stick out once you know the signs.
Keep your eyes peeled for these features — or lack thereof — to keep yourself and your personal information safe.
Many banks, online direct lenders, and credit card companies issue pre-qualification for certain financial products — which is generally allowed — so a message in your inbox (or physical mailbox) shouldn’t necessarily raise your suspicion.
This changes when the lender calls or texts you outright, especially if you have no history with the organization. Don’t click on any links or respond to any voicemails.
2. Bad Reviews
Unfortunately, a fake lender will successfully dupe some people. These unfortunate victims usually turn to the web to air their grievances. You can find them lodging complaints on every platform, from the Better Business Bureau to Google Reviews, Trust Pilot, and more.
Before filling out an application with all your info, look at these reviews. They’ll give you a sober view of the borrowing experiences through the eyes of consumers like you.
3. No Licensing
Lenders are legally required to have licensing and registration in the state where they offer personal loans. Most legitimate online loan companies boast these accreditations on their homepage, but confirming these certificates is a good idea.
Run lenders through the following resources to ensure they have the proper license:
4. Guaranteed Approval
Last but not least, be wary of any lender that claims they offer guaranteed approval. While this might be tempting when borrowing with bad credit, it’s a red flag for poor lending practices.
It implies that the lender doesn’t care whether you can repay your loan. There’s a good chance they’re hoping you are late so they can slap you with late fees.
5. Unrealistically Low-interest Rates
Do the terms they offer seem too good to be true? That’s a common red flag. Scammers use this tactic to lure individuals into their trap.
Stay away. There is more.
6. No Credit Check Required
Legitimate lenders typically conduct a credit check to assess the borrower’s creditworthiness. Be wary if a loan offer claims no credit check is needed.
7. Unsecured Websites
Check the website’s URL and make sure it starts with “https://” to indicate a secure connection. Avoid providing personal information on unsecured websites.
If you feel a website might be suspicious, feel free to verify it using our unique Scam Detector validator. Click to check websites or insert domain below:
8. Upfront Fees
This is the most common loan scam. Legitimate lenders generally deduct fees from the loan amount or include them in the repayment plan. If a lender asks for upfront fees before disbursing the loan, it’s likely a scam.
9. Unsolicited Offers
Avoid unsolicited loan offers via email, text, or social media. Legitimate lenders don’t usually reach out randomly.
10. No Physical Address or Contact Information
A lack of a physical address, phone number, or legitimate contact information on the lender’s website is a significant warning sign. Scammers often operate anonymously to avoid detection.
Legitimate lenders have physical offices. Be suspicious if the lender claims to operate solely online and lacks a physical presence.
11. Pressure to Act Quickly
Scammers often create a sense of urgency, pressuring individuals to make quick decisions without thoroughly reviewing the terms. Legitimate lenders give borrowers time to consider their options.
12. Poor Grammar and Spelling
Scam communications often contain grammatical errors and spelling mistakes. Legitimate financial institutions maintain professional communication standards.
Unfortunately, with the advancement of technology and AI, scammers use tools to correct their grammar and improve speech, which is harder to detect now.
13. Requests for Unusual Payment Methods
Scammers may ask for payment via wire transfer, prepaid debit cards, or other non-traditional methods. Legitimate lenders typically use standard payment methods.
The red flags are evident once you know what to look for. Keep this in your mind the next time you borrow money online. They’ll help you find a legitimate and safe lender.
Always research a lender thoroughly, read reviews, and check with official financial regulatory bodies to verify the legitimacy of an online loan offer. If something feels off or too good to be true, proceeding with caution or seeking advice from financial professionals is essential.
Report an Online Loan Scam
Warn your family and friends know about these scams. Feel free to share the article if it was helpful. However, you can report scammers and any suspicious activity officially to the Federal Trade Commission (most important), the Office of the Inspector General, and the FBI Internet Complaint Center by using the pages below:
How To Protect Yourself More
Do you want to receive alerts about the most notorious scams on a regular basis? Subscribe to our scam alerts. You will receive periodic emails from Scam Detector with exclusive tips. Those will include info on how to prevent fraud and insights about the newest tools you can use to fight crime.
Feel free to explore additional articles on related fraud. You can find them listed below this paragraph, so that you know more about online security. Last but not least, if you had any bad experiences, make sure to use the comments section below to expose other scammers.
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