Spotting Personal Loan Scammers and How to Handle Them

how to spot a loan scam

You probably receive dozens of phone calls each week, many of them from numbers that you don’t recognize. When you pick up the phone, you might be greeted with an offer for a new personal loan. Do you know how to spot a loan scam?

Scammers are always on the hunt for new victims, so you need to be prepared for what they might offer you. 

Personal loan scammers can be easy to spot if you know what to look for. They might reach out to you without solicitation, demand upfront fees, and remain purposely vague about what fees you will owe on a new loan.

If you fall prey to their scam, you need to be prepared to report them to the proper government agencies and demand your money back from the bank. 

Prepare to spot a scam from a mile away with some of these helpful hints. 

How to Spot a Loan Scam

Learning how to spot a loan scam in the early stages can save you a whole lot of grief and headache. Fortunately, there are a few guidelines you can keep in mind to spot a scam from a mile away.

Here are a few of the telltale signs that someone is out to sabotage your personal finances. 

The Lender Reaches Out to You

If you encounter unsolicited calls or emails from a lender, you should be wary of what they want. The only time that a lender should be reaching out to you is if you recently applied for a loan. Scammers will contact you about qualifying for a loan you didn’t apply for and try to trick you into giving them your personal information. 

Scammers Pretend to Know You

One of the most common scams occurs when someone pretends to be with an organization that you already know and trust. They could pretend to call from a local loan company or they could pretend to be with a branch of the government such as the Social Security Administration. If you have doubts about whether their call is legitimate, offer to call them back on the number listed online for those major companies. 

The Lender Tries to Pressure You

Scammers will try to pressure you into acting immediately. They don’t want you to have an opportunity to look into their claims. If they feel that you might hang up before giving them your personal information, a scammer may try to threaten you. If the scammer pretends to offer you a loan, they may tell you that this offer is only available for an extremely limited time to get you to act immediately.

The Lender Does Not Require Background Information

Some scammers will try to convince you that they are legitimately offering you guaranteed approval. While not all lenders require a credit check, they do need some background information from you before they can loan you any funds. Be wary of a lender who does not ask many questions before offering you loan approval. 

You Must Pay Fees to Get Started

Because they do not actually have the power to offer you a loan, scammers often want you to pay certain fees upfront. They might ask for a fee before you even begin the application process. Remember that loan origination fees are most often paid at closing, so you should not be required to pay for anything upfront. 

You Have No Idea What You’re Paying For

Even if they do not ask you for money upfront, a personal loan scammer will likely be elusive about the fees you owe on the loan. They like to wait until after loan approval to tell you all of the fees that you owe so that you are more committed to the process. Trustworthy lenders are always transparent about the fees and costs associated with your loan. 

The Payment Method is Sketchy

When a lender asks you to pay them immediately, it should raise a red flag for you. However, the method that they want you to use to pay them is equally concerning. A scammer may want you to do a wire transfer or pay with a credit card. If they ask you to pay through a gift card or via a personal check made out to an individual rather than the company, you might be the victim of a loan scam. 

Check for State Registry

The Federal Trade Commission requires all lenders to register with the attorney general in the states where they conduct business. The process of registering often includes background checks, which is why scammers typically try to forego this process. Be sure to check with your state to confirm if this proposed lender is verified before you hand over any of your sensitive personal information. 

The Lender Has No Address

Most lenders have a brick-and-mortar location even if they conduct most of their business online. Take the time to search for their physical location. If the only address you receive is a post office box, you should be concerned that you might be the victim of a personal loan scam.  

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What to Do If You Are Scammed

Despite your best efforts, there are times when scammers may fool you into giving them your sensitive information or money. It’s important to make sure that you report this scam to the appropriate authorities to prevent it from happening to others. Here are the steps you need to follow if you get scammed. 

Write Down the Details

When you report the scam to the authorities, you will need to tell your story several times. Before things get too far, write down all of the important details to keep your story straight. Make it detailed enough to get the point across but succinct enough to share quickly with multiple people. 

Report Scams to Government Agencies

When it comes to reporting scams, you have a lot of phone calls you need to make. You can start with your local government. Report any scams to your state consumer protection office. If you actually lost money in the scam, you need to report it to your local police precinct as well.

Once you have done this, it is time to start considering the various agencies you need to report to at the federal level. The Federal Trade Commission is the first place that you will want to call. You can also file a report online if this is more convenient for you. They take complaints about most types of scams including phone calls, emails, imposter scams, and demands for you to send money. 

If you need to report an online scam such as a fake website, emails, or even malware, then you should report to the Internet Crime Complaint Center (IC3). 

Last but not least, you should file a complaint with the Consumer Financial Protection Bureau. Their goal is to create transparency for financial products. If you have a concern about a scam related to a personal loan, they may be able to offer some assistance. 

Write to the Credit Bureaus

Once you give a scammer your social security number, there is no limit to chaos this can cause with your finances and credit. You will need to contact the credit bureaus (TransUnion, Experian, and Equifax) to file fraud alerts. This can help you to avoid identity theft. When you do file this report, make sure to obtain copies of your credit reports to check for errors and inconsistencies. If you notice anything fraudulent, you can dispute it at that time. 

Contact Your Bank or Payment Provider

Scammers can be extremely persuasive, and you might have sent them money before you even realized you had fallen victim to their schemes. When this is the case, you need to contact your bank or payment provider immediately. Let them know that you were scammed and ask them to give you your money back for the fraudulent charges. This can work whether you paid with a credit or debit card or through a wire transfer. 

How to Spot a Loan Scam: Can You Do It?

Once you know how a scammer presents their pitch to you, you can better prepare to protect your personal information and finances. Always be wary of a loan company that reaches out to you without solicitation. If they offer you guaranteed approval with no background information, you should be concerned. 

Unfortunately, there is no easy way to handle a scam once you have handed over your information and money. You will have to go through the process of filing complaints with the proper government agencies. With any luck, your bank or payment provider may be able to reverse the charges. 

The best thing you can do to avoid the headache is to be aware of the red flags before you hand over your information. Learning how to spot a loan scam helps protect your money.

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