Top 7 ways to spot online loan scams
Dealing with medical bills not covered by your insurance? Or you want to make some important car repairs, but your warranty doesn’t have you covered? Well, the answer you seek is a personal loan as it always rescues the day no matter the situation—even if it is a non-emergency.
Unlike other loan types, such as a mortgage or car loan, personal loans don’t need to be supported with collateral before they can be claimed, leading to an increase in its popularity.However, you must tread with caution when seeking a personal loan as there are numerous fraudulent lenders looking to take advantage of your need for money to rip you off.
While patronizing reputable lenders such as Cashfloat online would save you the risk of falling into the wrong hands, there are still some noticeable red flags that can be useful when selecting which platform to use.
Below are some tips that would come in handy when distinguishing a legitimate lender from a fraud.
1. The lender doesn’t show any interest in your payment history
One of the key parts of your discussion with a lender to look out for is the request for your credit report before lending you any money.
For all reputable lenders, they explicitly state that your credit report would need to be reviewed beforehand, sometimes going as far as obtaining reports from all three major credit bureaus—Equifax, Experian and TransUnion.
This is very important to reputable lenders as it shows if you have a history of paying your bills on time and in full, offering them some level of assurance about repaying the loan.
However, for fraudulent operators of loan scams, timely repayment is of no interest to them as they seek high-risk borrowers who they can slam with excessively high late fees and penalties.
2. The lender demands to see a prepaid debit card
Some fraudulent lenders will request to see a prepaid debit card, with the claim that they require it for insurance, collateral or other miscellaneous fees.
While legitimate financial institutions may charge a small fee for your application, credit report or appraisal, those charges are typically deducted from your loan.
3. The lender is unregistered in your state
According to the Federal Trade Commission (FTC), it is mandatory that all lenders and loan brokers must be registered in the state in which they operate. Thus, if a lender you’re opting for doesn’t list any state, you’re most like dealing with a scammer.
Therefore, before proceeding with a lender, check their website to verify a list of states where it legally operates. But if you don’t find any useful information, you can contact your state attorney general’s office for further verification.
4. The lender’s website is not secure
Another important tip to watch out for is if the lender’s website is secure, as what you don’t see is just as important as what you see.
Check for the padlock symbol in your navigation bar and ensure that there’s an “s” just after “http” on the site address. This is an indicator that the lender cares about your safety and isn’t selling your information to identitythieves or other criminals online.
5. The lender calls, writes or knocks
For most legitimate lenders, they typically advertise their services in the traditional way, either online or through other mass media.
However, if you get a loan offer over the phone, via mail or through a door-to-door solicitation, it is most likely a scam. According to the FTC, it is illegal for companies to offer a loan over the phone in the U.S.
6. The lender is applying unnecessary pressure on you
The urgency plea is one you should never fall for as it is the hallmark of personal loan scams. They’d go about offering a juicy offer but place an immediate deadline on it to force a rash decision out of their victims.
Take your time when deciding which lender would be best for you as apart from not showing any interest in your credit history, fraudulent lenders would equally charge sky-high interest rates, hence the need to avoid them altogether.
“Responsible lenders will charge no more than 36 percent annual interest for small loans,” said Diane Standaert, executive vice president at the Centre for Responsible Lending in a report.
“High APR exceeding 36 percent is a tell-tale sign that this is a loan that will most likely lead to a long-term cycle of debt that will damage their financial lives.”
One obvious red flag for fraudulent lenders is the absence of an actual physical address as operators of loan scams would rather remain untraceable to avoid legal action.
Therefore, ensure that the lender you’re opting for has provided a physical location that is verifiable and not just an address that is non-existent.