Plenty of people need to take out loans at certain stages of life. They’re ideal when buying a home, a car, or investing in something big and important, like a vacation or a wedding. But the world of loans is, unfortunately, littered with scammers who promise the easiest payments and best rates, but actually only want to take as much money as they can from you.
Loan fee fraud is one of these scammers’ go-to techniques. Let’s see how it works.
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How the Loan Fee Fraud Scam Works
A loan fee fraud scam or advance-fee loan scam works like this: the scammers say that they’ll give you a loan or some other sort of financial service, like a credit card. But they say that you have to pay them an up-front fee, before they deliver the loan you need.
Often, they’ll say that this is just an admin fee of some kind or a few for miscellaneous processing of your application.
In reality, it’s all a lie. The fee is simply money that the scammer wants to take from you and keep before disappearing and never delivering any sort of loan or credit at all.
The reason these scams often work is because they target vulnerable people or those who have poor credit score and are struggling to get loans elsewhere. Scammers might even say that they can get you a loan regardless of how bad your credit score is.
Red Flags You Shouldn’t Ignore
They Promise You’ll Get a Loan if You Pay a Fee
The most obvious sign of the loan fee fraud scam is when so-called “lenders” say that you’ll 100% get your loan if you pay the fee, regardless of your credit score or history. Some banks and lenders do ask for admin fees as part of loan applications, but they don’t make any promises that you’ll be approved or accepted just for paying these fees.
Unrealistic Loan Terms or Easy Applications
If something seems too good to be true, it often is. This applies to advance fee loan scams, too. As mentioned earlier, this is how they tend to ensnare their victims. They say that you’ll get the exact amount of money you want at a rate that works for you, all with an easy and rapid application process. And they may even say your credit score doesn’t matter at all.
Lack of Company Background or Accessible Information
A good way to spot scams in general is to try digging into the company you’re working with, whether it be a lender or an online store. Try to find out where they’re based, see if there are any reviews of them online, and look at how long the company has been around. If the information is hard to find, or all the details you discover are vague or concerning, it’s probably a scam.
How to Stay Safe from Loan Fee Fraud Scams
- Never accept to pay an admin or processing fee for a loan based on a promise that you’ll be approved.
- Don’t be fooled by lenders who offer unrealistic services, like great loan terms and rates for people with poor credit.
- Verify company history and check reviews online to learn more about a lender before you work with them.
Report the Scam
If you encounter an illegitimate lender, warn others about them in your circle of friends and family. You can also report them to the relevant authorities:
- Report to the FTC.
- Report to the FBI Internet Complaints Center.
How to Protect Yourself More
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Educate yourself on other types of financial scams and traps, like credit card scams, so you know what to watch out for.
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