In this article:
- 1. The Lender Guarantees You’ll Be Approved
- 2. The Lender Is Not Registered in Your State
- 3. The Lender Pressures You to Act Immediately
- 4. The Lender Does Not Have a Physical Address
- 5. The Lender Requires Upfront Payment
- 6. The Lender Reaches Out to You First
- 7. The Lender’s Website Isn’t Secure
- What to Do if You’ve Been Scammed
- Shop Legitimate Personal Loan Lenders
A personal loan may be just what you need to consolidate debt or pay for a large expense such as a car repair, home remodeling project or wedding. However, not all personal loans are created equal. Unfortunately, some of them are scams that can leave you with a great deal of heartache and financial stress.
By being aware of the most common signs of a personal loan scam, you can protect yourself and your money. Let's take a look at seven telltale signs of a personal loan scam.
1. The Lender Guarantees You'll Be Approved
If you don't have the best credit history, you may get excited when you come across a personal loan that offers guaranteed approval. Don't get too excited, as legitimate lenders never promise that loan applications will be automatically approved.
Since granting a personal loan is a risk, reputable lenders take the time to review a potential borrower's credit history and income before approving their request for a loan. Ads or websites that contain verbiage such as "Bad credit? No problem" or "Everyone is approved" are signs that a lender could be trying to take advantage of you.
2. The Lender Is Not Registered in Your State
According to the Federal Trade Commission (FTC), lenders must be registered in the states where they do business. If a personal loan lender does not list any states on their website, you may be dealing with a fraudulent one. It's a good idea to contact your state attorney general's office to find out whether the lender is registered in your state.
If a lender tells you they are not a U.S. company or are not required to register because they conduct business online, they are either operating a scam or lending illegally.
3. The Lender Pressures You to Act Immediately
One of the most common red flags of a personal loan scam is a lender that gives you a deadline to take out a loan. If they tell you their offer will expire soon or you must act by tomorrow, they're likely up to no good. Taking out a personal loan is a big decision, and a trustworthy lender will not pressure you to make a move right away.
4. The Lender Does Not Have a Physical Address
If the lender lists a physical address on its website, look up the address on a mapping website like Google Maps. If the address doesn't exist or the lender lists a P.O. box as their address, chances are the lender is a scammer. A legitimate lender will have a valid physical address that's clearly listed on their website.
5. The Lender Requires Upfront Payment
Reputable lenders do not require you to pay a penny before you receive your loan. If you come across a personal loan lender that demands a processing, insurance or origination fee before they can approve you, walk away fast. The lender is likely a scammer hoping to make a quick buck off of you.
While legitimate lenders may charge application, appraisal and credit report fees, these are typically deducted from the amount you borrow.
6. The Lender Reaches Out to You First
If a personal loan lender contacts you via phone or mail, do not respond. Trustworthy lenders do not advertise their services by cold-calling potential borrowers, sending them letters in the mail or arriving at their door. If a lender reached out to you first, regardless of whether it's online, in person or via mail, they may be a scammer trying to get access to your banking information.
7. The Lender's Website Isn't Secure
There are certain signs that may indicate a lender's website isn't secure. If you don't see an "s" after "http" on their site address or a padlock symbol on any pages where you're asked to provide confidential information, you're on an insecure website. The lender is either not concerned about safety or may be a scammer who is trying to steal your money.
What to Do if You've Been Scammed
If you fall victim to a personal loan scam, be sure to call the police immediately and file a report. While they may not be able to do much, especially if the scammer is an online lender, they can make the report public and help others avoid the same scam.
In addition to contacting the police, file a complaint with the FTC Internet Crime Complaint Center. This can also help you report the crime publicly and potentially shut down the scammer. The faster you take action after you've been scammed, the less time the scammer will have to target innocent people.
Shop Legitimate Personal Loan Lenders
By keeping these red flags in mind and doing your research before committing to a personal loan, you can avoid being conned to this constantly growing crime. If you need a personal loan from a reputable lender, check out Experian CreditMatch™ marketplace lenders.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.