10 Personal Loan Scams Signs

In 2019, imposter scams were the most common type of the 1.7 million fraud reports that the Federal Trade Commission (FTC) received. Personal loan scams are a part of the massive amount of fraud the FTC has to deal with. Are you looking for a personal loan but wondering how to spot a scam? This article will detail everything you know, including 10 red flags to look out for before signing for any personal loan.

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In this article

    What are personal loan scams?

    You might be seeking out a personal loan to consolidate debt, pay off medical bills or upgrade your house. It might be tempting to latch onto an offer of a guaranteed loan or a no-credit-check loan if you need fast cash. But you need to be wary of loan scams or anyone offering “free” money. Fake companies may be out to steal from you or take your identity (or both) rather than lend you the funds to cover your expenses.

    If you end up rushing into a fraudulent personal loan, you’ll be worse off in the end, so it’s important to take your time before signing any paperwork. Personal loan scams are usually offered by businesses that run fully online and have no physical address. Not all online lenders are scammers, but there are warning signs to look out for.

    10 signs of a personal loan scam 

    1. The loan is guaranteed

    If a lender tells you that you are guaranteed to get a loan, you should think twice. Lending money is a risk. Thus, any reputable lender will need to look into your financial history to make sure you will pay back the loan.

    2. The lender doesn’t need to check your credit

    Lenders who know what they’re doing always need to look at your credit report before finalizing their offer to you. Your credit report tells lenders what kind of repayment history you have and how likely you are to pay back the loan. Stay away from a lender who doesn’t need to look at your credit and consider trying a bad credit lender if your score is low.

    [ Related: Multiple Personal Loans and Your Credit Score ]

    3. The lender isn’t registered to conduct business in your state

    Every legitimate lender needs to register in your state to conduct business. Check with your state’s attorney general office to make sure the lender is registered. If it isn’t, it probably isn’t legitimate and should be avoided.

    4. The lender doesn’t have a physical address

    Before working with any lender, look up its physical location. If it can only provide a P.O. Box, you might be dealing with an expert in money scams. Even if you’re given a physical address, visit it on Google Maps to make sure it’s not just a vacant lot — some scammers try to get away with this.

    [ More: Personal Loans for Self-Employed Workers ]

    5. The lender makes you use a prepaid card or pay an individual

    If the payment the lender asks for seems off, like it will only accept a prepaid credit card or it asks you to pay a person directly, you should hesitate. Personal loans scams prefer to take non-traceable forms of payment rather than a check or money transfer.

    6. Your loan offer comes via phone, mail or in-person

    Real lenders will not call you, send you mail or come to your door. Instead, lenders use online resources or media to advertise to you. If you have a company reaching out to you to offer a personal loan, consider that a red flag.

    7. The lender’s website is unsecured

    If the lender has a website, make sure it has two things: a padlock symbol next to the web address and “https” rather than “http” in the site address. Without either of these things, the website is not secure. This leaves your personal information free for identity thieves to take and could mean that the lender is waiting to take your data.

    [ Related: The Basics of Identity Theft ]

    8. You feel pressured to act right away

    If the lender pressures you in any way, walk away. The lender may say that the deal will expire in 24 hours or give you another form of urgent deadline. A legitimate lender won’t do this.

    9. The lender is vague about its fees

    A lender not disclosing how much it charges for its services on its website or when asked is a sign of fraud. It should be upfront about what you’re expected to pay. You will have to pay fees to a legitimate lender, but you’ll be able to find out that amount ahead of time.

    10. The lender requires you to pay upfront

    A lender asking you to make immediate payments before receiving the loan is a sign of a money scam. Most true lenders will take out the fees from the total loan amount dispersed to you.

    [ Read: The Best Online Lenders ]

    Check Your Personal Loan Rates

    Answer a few questions to see which personal loans you pre-qualify for. It’s quick and easy, and it will not impact your credit score.

    Get Started

    with our trusted partners at Bankrate.com

    What to do if you think you’ve been scammed

    If some of these warning signs sound familiar and you’re worried you may have gotten scammed, there are several steps you should take. First, you’ll need to file a report with your local police and with the consumer protection office in your state. Then, file a complaint with the FTC online or by calling 1-877-FTC-HELP. Additionally, let your banks know and replace your cards if you can. You can also consider freezing your credit or adding fraud alerts to your account.

    How to spot a legitimate loan company

    In addition to watching out for the red flags we highlighted above, there are other ways you can avoid personal loan scams. Search the name of the company in an online database with the word “complaint” or “scam.” If anything comes up, especially across multiple platforms, trust that there’s something fishy going on. 

    Then, when you think you found a lender you’d like to work with, head to the National Association of Attorneys General. Find the attorney general office in your state to make sure the company is registered to conduct business in your state. Additionally, check online reviews of top personal loan lenders and make sure your prospective lender is on the list if you want the best deal.

    [ Read: How to Get a Personal Loan With Fair Credit ]

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Tiffany Verbeck

    Contributing Writer

    Tiffany Verbeck is a personal finance expert. She uses her storytelling skills gained from a master’s degree in writing to run a freelancing business focused on helping people make and manage their money. She has been published in The Financial Diet, Fast Capital 360, The Write Life, Matador Network and other publications

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.