Personal loan scams are widespread–there are tens of thousands of reports of these types of scams every year. This accounts for millions in losses from those who need money the most. A great way to ensure you are not scammed is to compare personal loans and lenders, so you always know you are getting the best rates.
Common Signs
- You feel pressured to agree
Taking out a personal loan is a big decision, so you should not feel pressured to agree. Be wary of time-sensitive offers or lenders that ask you to sign before you have had a chance to read through the paperwork. Lenders should never pressure you into taking out a personal loan, so it is a big red flag if you feel rushed.
- The lender is not being transparent
The lender should be able to provide you with an itemized list of costs and fees and give you detailed information about your loan terms. If you are having trouble getting a straight answer out of someone, you should not be doing business with them. The contract or offer should be detailed and not leave you with questions. If you do have questions, your lender should be willing to answer them.
- The lender is not registered
The Federal Trade Commission (FTC) requires that lenders register with the attorney general in their state. If your lender is not registered, do not do business with them. It is easy to search online to ensure you are dealing with a legitimate organization.
- Negative ratings
Always see what other people say about a lender before agreeing to work with them. Look them up on multiple review websites and the Better Business Bureau to ensure they are legit. Always dig around to find as much information as possible about a company before signing anything. There should be plenty of information out there about your lender.
- It sounds too good to be true
If it sounds too good to be true, it almost always is. If you are solicited by a bank that you have not heard of before with excellent terms, this should raise some question marks. If the terms of a loan are leaps and bounds better than the alternative, you might be scammed. Of course, lenders always vary, but they should not be wildly different. It might seem great at first if they do not require a credit check, but this is just another sign of a scam.
- You are required to pay fees upfront
Apart from application or origination fees, which are common, you should not have to pay your fees upfront. Many scammers will require fees before disbursing the funds. Once they receive your payment, they disappear and leave you without funds. Loans will typically incorporate most fees into the loan payments, so you should not have to come up with the money in advance.
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- They ask for payment outside the lending institution
This is a scam if the lender asks you to wire them money or purchase gift cards as payment. Lenders should have a clear and easy-to-follow process for making payments online or over the phone. Never complete a transaction for a loan that feels uncomfortable.
Bottom Line
By being aware of these signs of potential scams, you are protecting yourself and your finances from scam artists. If something feels off, trust your gut. Stay current on the most common scams and do your homework before signing the paperwork.
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