The coronavirus pandemic has had a significant effect on the economy. And more than a million people filed an initial claim for unemployment benefits during the week ending August 22, 2020, according to the Department of Labor.
Amid the current economic uncertainty, you might be investigating personal loan options to help make ends meet. An excellent place to start is by visiting Credible, where you can discover reputable lenders and compare rates and terms all in one place.
But be on the lookout for warning signs of a private loan scam. In 2019, consumers reported losing more than $1.9 billion due to fraud, according to the Federal Trade Commission (FTC). Frequent scams include student loan relief, debt consolidation, and credit repair, which cheat customers out of money and damage their credit in the process.
As you start to explore your loan options, keep an eye out for red flags that a personal loan offer could be a scam. There are at least five loan scam warning signs:
Guaranteed loan approvals
- The lender hides or changes its fees
- The lender isn’t registered in your state
- The lender requires an immediate commitment
- The lender demands a prepaid credit card
Guaranteed loan approvals
To ascertain the conditions and amount of a loan — particularly for a large loan — lenders will need to evaluate a borrower’s risk by looking at their credit score, income, and employment history.
If a loan offer touts”guaranteed approval” or”no credit score required,” it might be a scam. While having bad or low credit doesn’t necessarily mean a borrower can’t qualify, legitimate personal loan lenders do not advertise guaranteed loan approvals without thoroughly reviewing a borrower to understand their own risk.
Credible can help you browse the personal loan application process and ensure you find a legit lender and save money in the long run.
The lender hides or changes its fees
The Truth in Lending Act requires that lenders disclose the annual percentage rate (APR) and finance charges — such as application fees, late fees, and prepayment penalties — to help borrowers compare prices and conditions.
If a lender does not list these costs on their site or through an initial loan offer, won’t disclose them during the application process, or changes the fee structure as you get further into the loan application process, this is a red flag that the loan may be a scam. Reputable lenders follow fair credit procedures and will clearly disclose rates and fees.
Credible lists all fees associated with a personal loan online.
The lender isn’t registered in your state
If the lender isn’t registered, then that is probably one of many red flags.
Before you fill out a personal loan application, check the lender’s website to confirm that it is accepted to make loans to borrowers in your state. The FTC requires lenders to enroll in the states in which they conduct business. If the lender doesn’t have a list of registered states, you can contact your state’s banking or finance department to confirm that it’s operating legally. Good lenders will be happy to share info on the locations they are approved to work.
The lender requires an immediate commitment
High-pressure tactics are intended to get a borrower to act fast without fully understanding or exploring financing offer, and they are a telltale sign that the loan may be a scam. If the lender claims that the loan offer will expire within a day or two of your request or if you’re feeling pressured to sign paperwork under a short deadline, it might be because the loan is a scam. Legitimate lenders will provide you several days to complete the process.
Here’s everything you need to know about personal loans (and the process). Credible may also walk you through it step-by-step — just visit their site to find out more about what to expect.
The lender demands a prepaid credit card
Reputable lenders may charge an application or credit report fee so as to initiate the loan process, but they will request payment using a debit or credit card or another form of personal payment. If the lender requires you to provide them with a prepaid debit card, it is almost certainly a scam. Prepaid debit cards are almost untraceable, giving you no recourse as soon as you buy and deliver it. Don’t do business with a lender that demands this form of payment.
If you need a personal loan, then take action to protect your finances. If you think you’ve been scammed or if a creditor has questionable business practices, file a complaint with the FTC. If a loan offer seems too good to be true, it probably is.
The ideal place to begin is with a site like Credible, where you can compare lenders and their offers to get the best options and monthly payments for your special conditions.
Regrettably, scammers are more than prepared to take advantage of people in need, including during a pandemic. It’s up to you to protect yourself by asking questions, doing your research, and only dealing with legitimate companies.