Loan scams trap more than a million Americans every year with a loss of over $900 million. In this content, I’ll not only show you the seven warning signs of a loan scam, I’ll reveal the two most common scams that cost you money. We’re disucssing 7 Warning Signs of Personal Loan Scams today.
7 Warning Signs of Personal Loan Scams
Let’s discuss about Money! Make your money work for you. Creating the financial future you deserve. I want to send a special shout out to everyone in the community, thank you for taking a little of your time to be here today. I was leveraged to the hilt and saw it all fall apart when housing tanked in 2008. My credit score was shit and I couldn’t get a loan to save my life, but how I was able to recover was through a personal loan to consolidate the debt. It helped me get back on my feet. So I’ve been sharing mine and other people’s experience on the blogs since 2013 but every story, I’ve shared hasn’t always been a happy ending.
In fact, This is Important to know 7 Warning Signs of Personal Loan Scams! Whether you’re planning on getting a loan or not, proper learning could save you thousands someday. Besides the money it will save you, it could save your finances, your credit score and your sanity. I’m going to start with just a quick explanation of what are personal loans and why you might need one someday. Then I’ll reveal those 7 Warning Signs of Personal Loan Scams that you’re being scammed online with examples of real-life scams.
Again, even if you don’t need a personal loan now, write these warning signs down because this affects everyone. The Federal Trade Commission received more than 1.1 million fraud reports last year with over $900 million in fraud losses. So a personal loan is simply an unsecured loan, you get from a traditional bank or online lender. Unsecured means you don’t have to put up your house or car as collateral. You can use the money for whatever you like. The average rate on personal loans is around 14%. So, this isn’t something you use for casual spending but that’s still below the 18% average rate on credit cards. So, about two-in-three loans are taken out to pay off card debt.
Another upside is that the online lenders usually have lower credit score requirements than traditional banks, so you can usually get one of these loans even after your FICO falls like mine did in the recession. You can imagine attracting borrowers, this brings out the scammers, the loan sharks and the hackers. Almost a trillion dollars a year is stolen from people through fake loan promises and scam sites. The first warning sign, you should watch for is promises of no credit check loans. Now I know these sound great, get a loan even with bad credit because the lender doesn’t even check your FICO score. Understand though that legit lenders are in the business of charging a fair interest rate depending on the risk in a loan.
The only way they know the risk is by checking your credit report and score. So, if they’re promising you money without doing this, you’ve got one of two things. You’re either going to get a super-high interest rate. We’re discussing 35% a year or higher. At this rate, even if a lot of those loans aren’t repaid, the lender is going to make money. A lot of these no credit loans are just outright scams. They’re going to rope you in with that promise then drain your bank account, before you know what’s happening. The next warning sign, and this is where most of the scams make their money, is with upfront fees or collateral. No legit personal loan site will ever charge, you an upfront fee before you get your loan. Most charge an origination fee, which is taken out of the loan before it hits your bank account but that’s only once you’ve gotten the loan.
Now this might be worded as an application fee or a processing fee or whatever think about it. The lenders are in the business of processing loan applications and making loans, why would a legit lender charge you a fee for the possibility of making money off your loan? Please do not pay a fee to an online lender. Even if the loan site seems legit, there’s no reason to pay any fees upfront. The third warning sign, and this one is probably the best for spotting scammers, is an unregistered lender. All lenders, even online ones, must register in each state where they want to do business. This is usually through the State Attorney General’s office or with a special state banking regulator so check online for your state. The state regulator examines applications for fraud companies and also takes complaints. So, this is a great resource to check anytime a lender comes to you to offer a loan. Four more warning signs before I reveal the two most common scams and how to tell if a lender is legit.