8 Signs of a Personal Loan Scam

Quick Answer

Some scammers offer fake personal loans to steal personal information or collect upfront fees from victims who apply for them. You may be able to avoid scammers if you can spot some common red flags, such as a guarantee that you’ll be approved.

Senior man looking warily at his smartphone.

Personal loan scams can hit you when you're down. You might need money for an emergency or to help pay for a large expense. Instead of getting the loan and paying it off over time, the scammers take your money or personal information and leave you even worse off. If you're looking for a personal loan, compare personal loan offers from a trusted source and watch out for these eight warning signs of a personal loan scam.

1. The Lender Guarantees You'll Be Approved

Legitimate lenders will take various steps to verify your identity and ability to repay a debt when you apply. If a company guarantees you'll be approved, it likely isn't actually in the business of lending money.

Lenders might preapprove you for a personal loan and you can try to prequalify for a personal loan. These options can help you find out whether you'll likely get approved if you apply. But neither is an absolute guarantee.

2. The Lender Pressures You to Act Immediately

Scammers often pressure victims to act quickly by threatening their targets or offering limited-time deals or opportunities. Their tactics can vary, but they all have the intended goal of leading someone to respond without thinking clearly.

For example, the scammer might say that it will withdraw the loan offer if you don't apply today. Or, that it can give you a low interest rate, but only if you apply right now.

Try not to act out of fear—it may be best to walk away and look for a different option. Even if it doesn't wind up being a scam, you might not want to borrow money from real lenders that are excessively pushy.

3. The Lender Demands an Upfront Payment

One common form of personal loan scam is called an advance-fee scam. This is when lenders ask you to pay an upfront fee in exchange for finding you a loan or approving your loan. But the scammers actually take the money and disappear.

It can be hard to distinguish advance-fee scams from legitimate loan fees because real lenders can also charge upfront application or appraisal fees. Personal loans may have origination fees that are taken out of the loan amount. For example, if you get a $10,000 personal loan with a 5% origination fee, you'll receive $9,500.

But if you're asked for an upfront fee and there are any other red flags, that's definitely more reason to suspect a scam.

4. The Lender Asks for a Lot of Personal Information

Rather than trying to trick you into sending them money, some scammers might use fake personal loan applications to collect people's personal information. They can then sell your personal information or use it to commit various types of identity fraud.

Lenders will often ask for your name, address, Social Security number and other personal information to verify your identity and maybe check your credit. Sharing this personal information can be risky, which is one reason you want to watch out for other signs of a scam. But be especially wary of a company that asks for unusual personal information, such as your mother's maiden name.

5. The Lender Calls or Texts You First

Real loan companies will often advertise, and they might send you letters or emails inviting you to apply or letting you know that you've been preapproved for a personal loan. However, scammers might try to call or text you to offer you a loan—some even purchase marketing lists with contact information for consumers who previously searched for or applied for a personal loan.

6. The Lender Isn't Registered in Your State

Legitimate lenders have to register in every state where they want to issue loans. You may be able to look up the company's registration by looking for a list of the licenses on the lender's website—look for a link at the bottom of the page. You can also try to find or verify their license with your state's attorney general's office or bank regulator.

7. The Lender Doesn't Have a Physical Address

Although there are many online-only lenders that offer personal loans, the company should still have a physical location where its employees work. Scammers might avoid listing an address online because they're trying to stay anonymous. If there is an address, check to see if it matches the address on the state license.

8. The Lender's Website Isn't Secure

Today, most websites are secure, including many scam websites. But if the website doesn't have an "s" after "http" in the URL—or your browser warns you that it's an unsecure site—that's certainly a bad sign. Even if the company is legitimate, an unsecure website could be bad, as it may indicate the company won't do a good job of keeping your personal information safe.

What to Do if You've Been Scammed

Falling for a scam can be a stressful and costly experience, but you're far from alone if you do. According to the Federal Trade Commission's (FTC) Consumer Sentinel Network Book for 2023, nearly 26,000 people reported paying a scammer an advance payment for credit services in 2023.

Unfortunately, you likely won't be able to get your money back if you've paid the scammer with a gift card, cryptocurrency or other type of non-reversible payment. But you can:

  • Try reversing the transaction. If you paid with a credit card, bank transfer, wire transfer or P2P app, you might be able to get the transaction reversed if you contact the financial institution quickly.
  • Report the scam. Tell the FTC what happened on ReportFraud.ftc.gov to help the government spot trends, create relevant educational material and prosecute scammers.
  • Report identity theft. If the scammer has your personal information, you may want to report the identity theft on IdentityTheft.gov. You can also add fraud alerts to your credit reports and have the right to freeze your credit reports for free, which can limit access to your reports and keep someone from opening a new credit account in your name.
  • Secure your accounts. If you shared your usernames and passwords with the scammer, create completely new and strong passwords for those accounts.

Get Matched With Legitimate Personal Loans

There are many legitimate personal loan companies, and comparing options from multiple lenders can help you find out which ones will offer you the lowest fees and interest rates, and highest loan amounts. Experian can show you personal loans matched to your unique credit profile from multiple partners to help you find the best option.