Consumers lose billions of dollars a year to fraudulent loan practices. The primary victims are those most in need of a loan and most likely to fall for a fake offer because they are turned down by legitimate lenders. Here’s how loan scams typically work:
No credit check scam:
Legitimate lenders typically require a credit check for loan approval. Loan scammers promise to approve your loan without a credit check. No credit check requirement should be a major red flag.
Loan fee scam:
Loan scammers try to entice borrowers with low-cost loan offers only to charge victims hundreds of dollars in fees when applying for the loan. Once the fees have been paid, the scammers disappear. Legitimate lenders deduct any fees from the loan.
Debt consolidation scams:
Debt consolidation is a valid and effective method to help borrowers restructure their debt payments, saving them money while accelerating their debt payoffs. Borrowers pay the debt consolidation company one monthly payment which is then disbursed to the various creditors. A scam company can be very aggressive in getting you to sign on and then tell you not to contact your creditors. They receive the monthly payments but fail to pay the creditors.
Other signs you are dealing with a loan scammer:
• The lender demands some sort of upfront payment in cash or by gift card
• The lender has no physical address
• The lender is not transparent about their fees
• The lender pressures you to act now
• The lender is not registered in your state (no loan authority)
• You receive calls or letters from the lender (not allowed)
Steps to take if you have been scammed:
• Contact local law enforcement and file a report
• Place a fraud alert with the major credit bureaus letting them know you may be a victim of fraud • Going forward, always do your research and compare multiple lenders, especially those who offer to help credit-challenged borrowers