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Most of us need a little more cash every so often, whether for a large purchase, such as a home or car, or for unexpected expenses, like car or home repairs. With so many lenders available and hoping to gain your business, navigating through which finance companies are real and those that are fake can be the difference between obtaining the funds you need, or being scammed out of your hard-earned dollars!
While your local banks, credit unions, or lending companies with storefronts that you can walk into and apply for a loan are usually the safest way to avoid scams, many financial institutions offer online applications to apply for the funds you need. Watching for signs that a lender may not be legit can become difficult, but we have a few things you can be aware of to protect yourself:
Receiving unsolicited loan offers, especially when you are not looking to borrow funds, may be a sign that the offer is a scam. Many financial institutions advertise loans or credit cards to consumers. If these come from your bank, credit union, or credit card company, they are likely legitimate. But if you receive emails or text messages from lenders that you have no current or prior relationships with, be wary. The supposed lender may be a scammer attempting to have you complete a fake online application to steal your private information, including your Social Security Number, to steal your identity.
Your current financial institutions may offer loans where you have been pre-approved based on an application you have completed before making a purchase. However, reputable lenders cannot make unconditional guarantees about loan rates, amounts, or approvals without reviewing your financials, credit information, and other important information about your ability to repay the loan. If you see an advertisement online or receive an email stating that the lender can “guarantee” your loan will be approved, this is a sign that the company may be a scammer attempting to steal your information.
Finance companies are regulated entities that must follow certain governmental guidelines when making loans. If the lender requires that you pay an upfront fee to apply for the loan or if they require that you pay a fee to have a loan disbursed, it may be a scam. Typically, most reputable lenders will deduct associated fees and costs from the amount disbursed or add the amount on top of the value you are borrowing; paying these fees upfront and out of pocket is usually a choice left with the borrower. Additionally, your lender should provide you with a listing of all fees associated with your loan request upfront prior to signing the loan agreement.
Lenders should have physical locations for their financial institution, even if they operate solely “online.” Reputable companies should have a physical address to receive mail as well as contact information (both online and by phone) for consumers to reach out to the business with questions or assistance. If you have trouble locating good contact information for the business, steer clear; it may be a fraudulent lending organization attempting to steal your information.
If you are contacted by anyone, including a finance company, asking you to provide your banking information or online banking credentials to help with a loan transfer to another person, do not provide any information. A tactic that scammers will use is to ask individuals to help get loan proceeds to another customer by using your bank account. They even offer to let you keep some of the funds being transferred as a fee for this assistance. Even if the purported funds are not from a loan, such as investments or inheritance funds, this request is a huge red flag. The criminals are attempting to use you as a money mule to launder illicit funds through the financial system. This activity will make you complicit in the crime, and you can face criminal charges. If you receive this type of request, cease communication immediately.
By staying vigilant and watching for signs of loan scams, you can protect yourself from becoming a victim of these bad actors. Even if you find yourself in the middle of a scam, don’t let embarrassment keep you from reaching out to your bank, law enforcement, or a trusted friend. Scams can happen to the best of us; what’s important is that we learn to recognize what is happening and take control back from the criminals by mitigating future risks and loss.
