Personal Loan Red Flags: Identifying Scams to Avoid Losses
Scammers have been plaguing the world for a long time now, and they are relentless in the pursuit of their goal—to get your personal information and money. They lure and use different techniques to gain your trust that they are reliable and trustworthy. As such, you need to watch out for the red flags, or else you will land in the hands of a fraudulent scheme!
Personal loan scams are one of the most common targets for these ill-willed people to take advantage of. It is usually targeted to consumers who are looking for quick financial solutions. Usually, the business is done online, with no storefront or physical address. The practice is that the ‘company’ collects sensitive personal information and fees from victims—with no intention of ever extending a loan.
To save yourself from landing with this kind of scam, take a look at these red flags and learn how to identify personal loan scammers to avoid losses.
1. “No Payment History, No Problem”
A reputable lender ALWAYS does a background check. This procedure is for their assurance that you are actually a good payor by looking at your credit history. Usually, they get reports from major credit bureaus, and they investigate if you are paying your bills on time to ensure that you will do the same for them.
On the other hand, scammers will not take an interest in these things. They do not care about your payment records. In fact, scammers usually target high-risk borrowers who are likely to fall behind. If you encounter such cases, it is time that you back out because, most likely, you have a higher chance of falling into a scam.
Helpful Tip: Make sure you do some research about the lender. Double-check if they are certified and think twice if the requirements are a little too lax.
2. Not State-Registered
It is common knowledge that legitimate businesses are required to register with the state’s authority. If your lender is not listed in any of the states’ governing bodies or cannot provide business registration documents, then they are most likely a scam!
You can confirm this information by checking with your state attorney general’s office or contacting your state’s Department of Banking or Financial Regulation.
Helpful Tip: Before saying yes, ensure that you have verified the legitimacy of the business by calling all necessary personnel related to banks and loans.
3. The Prepaid Credit Card Requirement
Another red flag would be the collateral insurance that they are getting from their borrowers. Usually, scammers use prepaid credit cards as their collateral and claim it as their insurance that you will pay them back!
Legit lending companies may ask for a fee for your application, appraisal, or credit report—but those charges are deducted from your loan. If their collateral seems out of the ordinary, then it’s probably time to double-check the lender you’re approaching!
Helpful Tip: Clarify the breakdown of the charge or fees your lender is charging and ensure that it is merely for the application and other requirements.
4. Loan Offers Through Calls, Mail, or Door-to-Door Solicitation
Given the rules in the U.S, it is illegal for companies to offer a loan over the phone and ask you to pay before they deliver. If ever you experience this with a lender, beware that it is a scam!
Helpful Tip: Do not engage if the lender makes any of the remarks mentioned.
Gaining knowledge about personal loan scams can save you a lot from losses. If you have been exposed to one, make sure that you report it to the authorities to avoid any further issues! Moreover, if you are interested in making personal loans, ensure that you will go to a straightforward, fair, and honest loan company.
In Mid-Town Finance Company, the business has served the greater Huntsville area since 2000. We have proved that we can be anyone’s partner, especially in times of need. We provide an installment loan plan that will work to what you can—and we do not charge any hidden fees! Call us to make a personal loan today!