There have been some incredibly tough times during the pandemic. Many people have financial problems, so there is no surprise that the payday loans business has been booming lately. As long as the loan exchange it's done right, both parties should mutually benefit from the transaction. However, there are malicious characters out there who prey on people's naivety and desperation, mostly using the spoofing techniques.
Regardless of where you are or what your financial situation is, it would be best if you also learned how to spot loan scams.
Have you received an offer extending a loan? If so, it's essential to make sure it's the real deal before applying. Don't know how to differentiate scams from valid offers?
We've got you covered. Here are five signs you should look for to avoid falling for lending scams.
1. Guaranteed Loan Approval
Does your potential lender guarantee your loan approval? If you answered yes, you should stop and think twice before submitting your application. Legitimate lenders won't guarantee your loan approval.
Your lender might request your personal information, payment history, credit report, among other details, to extend a loan. Remember, their underwriting team will analyze your information to ensure you can repay your loan.
2. Lender Doesn't Detail Fees or Process
Legitimate financial institutions will detail any fees or the process to obtain your loan. It would help if you stayed away from “lenders” that won't explain potential costs or what to expect before and after getting the loan.
If you ask the hard questions and the representative keeps avoiding it, they might be trying to scam you. Legit payday loan lenders aren't an exception to this rule either. Their representatives will also explain what happens if you don't repay your payday loan.
3. You'll Need to Pay Upfront Fees
Financial scams will ask you to pay an origination or processing fee upfront. Reputable lenders won't request an upfront payment to process your application.
Some scammers may even ask for a prepaid credit card for fees or as collateral. Make sure to read the fine print at the bottom of the loan offer to ensure the financial institution doesn't request any upfront fees.
4. The Company Won't Consider Your Payment History
Some legit payday loan lenders won't consider your credit report. However, these companies will take a look at your payment history and sources of income.
A lender that won't even consider your payment history is a huge red flag. If you apply for a loan with this lender, you might fall victim to a lending scam.
5. Lender Doesn't Offer Traditional Payment Methods
Legitimate financial institutions will ask you to make payments to them. In contrast, financial scammers will ask you to pay another person, make your payment using a gift card or other non-traditional forms of payment. Direct payment from your bank account, paying at one of their branches, online payments, and mailing your check to their offices are traditional payment methods.
So You Learned How to Spot Loan Scams, Now What?
Learning ways to spot loan scams is vital to protect your identity and finances. Today, it's common for lenders to process your loan online. However, consumers should still reach out to their lender before submitting any personal information.
Contacting your lender will prevent providing your information to a scammer. Be aware many lenders may extend loan offers via email. Yet, most of them list offer codes in the email or letter you receive.
Did you find this article useful? Please keep browsing our site to learn more information to protect your identity and financials today.
Loan Offer Scam: How To Report It
Warn your family and friends about these loan offer scams by sharing this article on social media using the buttons provided. You can also officially report the scammers to the Federal Trade Commission using the link below:
How To Prevent Identity Theft and More
If you want to be the first to find out the most notorious scams every week, feel free to subscribe to the Scam Detector newsletter here. You'll receive periodic emails – we promise not to spam. Meanwhile, educate yourself with some other fraud-related articles right under this paragraph, so that you can protect yourself in many other aspects and niches. Last but not least, use the Comments section below to expose other scammers.
Here are some must-reads for the end:
Securities Fraud Scam
Pump and Dump Scheme Scam
Gold IRA Investment Scam
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