Fraudulent loans cost American consumers more and more each year, jumping from $905 million in 2017 to $1.9 billion in 2019. Fraudsters tend to prey on loan seekers who have previously been denied because they’re more likely to be less careful. If you’re considering a loan, know how to spot a scam to avoid becoming a victim.
- Phone offers: Reputable lenders advertise in mainstream ways, such as online, in commercials, or via social media. Be wary of mailers, door-to-door solicitors, and phone calls. In fact, it’s illegal to offer loans over the phone.
- No credit check required: Legitimate lenders may offer loans to people with bad credit, but they don’t ignore credit scores altogether. Expect to show proof of income, provide references, and offer collateral in the case of secured loans.
- Guaranteed approval: Lenders consider several factors when deciding your eligibility and interest rate. Any offer that suggests you are “guaranteed” to be approved despite your income, credit score, or debt is probably a fraud.
- Pressure to act immediately: Don’t fall for high-pressure tactics, such as being told you must sign immediately, or the offer will expire. These are methods scammers use to get victims to make rash decisions.
- Upfront fees: Steer clear of anyone asking for money upfront. Legitimate financial institutions may charge application fees, but these are rolled into the loan, not paid for in advance.
- Wire transfer or prepaid credit card requests: Never wire fees or loan payments to an individual. Don’t send out prepaid credit cards, either. Scammers use these methods to remain untraceable. Instead, ask for a lender’s physical address, which you can verify before doing business.
- Illegitimate company names and addresses: Fake websites may appear convincing, but you should authenticate the information yourself. Look up company names with the Better Business Bureau and check physical addresses on Google Maps.
- No customer service number: Reputable financial institutions have a phone number you can call to speak with a representative. If you see a phone number listed on the lender’s website, try calling it and see what happens.
- No state registration: Banks and lenders must register with the state where they do business. Verify registrations with the Texas Department of Banking or the Attorney General’s office to ensure you have found a legitimate business.
- Consumer complaints: Even if a business is legitimate, it could still be guilty of predatory lending. Check the BBB’s Scam Tracker to see if anyone has filed a complaint against the lender you’re considering.
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