Five Signs of Personal Loan Scams
Each fall, we recognize International Fraud Awareness week to show consumers how easy it is to become a victim of fraud. Each year the reports of scams increase.
In 2023, Consumers lost more than $10 billion in fraud according to the Federal Trade Commission (FTC). This includes victims of personal loan scams.
Protect yourself by learning the signs that you’ve been a victim of fraud. If you, or someone you know, suspects they have been a victim of fraud, you can report it here, and learn more about what to do.
1. Random text messages and robocalls: If you receive an unsolicited robocall or text message inviting you to apply for a loan, be cautious, especially if you haven’t initiated contact with the lender. Typically, borrowers reach out first when seeking a loan. Legitimate offers may come from your bank after you’ve shown interest. It’s best not to trust the message and contact the banker directly. For random contacts, it’s a good idea to delete suspicious texts and to hang up on robocalls.
2. Unrealistic guarantees for approval: A legitimate lender will require thorough review of your credit and finances. If a lender guarantees approval without assessing your financial situation, that is a major red flag. Scammers often target individuals with poor credit or financial difficulties by offering loans with guaranteed approval, hoping they’ll be enticed by an offer that seems too good to be true.
3. No physical address: A lack of physical address should give you pause when assessing a potential lender. Even online lenders usually provide a verifiable mailing address as part of their contact details. Scammers often omit physical addresses to stay anonymous and avoid accountability. If you can’t confirm a lender’s location through simple online research, consider deleting the message and not responding further.
4. Pressure to act immediately: Scammers often push people into making quick decisions, often presenting limited-time offers. They may even resort to threats, warning of legal action or other repercussions if you don’t act immediately. Legitimate lenders, on the other hand, encourage informed decision-making and typically allow time for you to carefully consider your options. If you feel rushed or uneasy about a lender’s approach, it’s wise to explore other options.
5. Upfront fees and hidden costs: Upfront costs are a red flag for personal loan scams. Most legitimate lenders do not ask for payment before disbursing loan funds other than a possible loan application or credit report fee; instead, they deduct fees from the loan or include them in the repayment terms. Scammers may label these upfront costs as “processing” or “insurance” fees, then disappear after receiving the payment. If loan approval is contingent on immediate payment, it’s likely a scam.
