Personal loan scams can be devastating to your finances and your identity. It's not uncommon for scammers to try and lure you with promises of guaranteed approval, pressure to act immediately, or make other too good to be true loan offers. These scams can take many forms but usually use similar tactics. To help protect your finances and identity, we're sharing types of personal loan scams and how to spot them.
Common Personal Loan Scams to Look Out For
- Advance-fee scam. This scam involves scammers charging an upfront fee for a loan that never happens.
- Phishing scams. Phishing is a popular tactic used by scammers to try and trick you into clicking or opening a malicious link or attachment to get your personal and financial information. Scammers will use email or text messages to lure you in with promises for a loan and easy approval. Links in the email or text usually go to an application that looks authentic, but it's just a way to phish for your personal and financial information.
- Debt relief. These scams may involve charging cash-strapped individuals a large upfront fee but then fail to settle or negotiate their debts.
How to Spot Personal Loan Scams
Being wary can go a long way in helping you to avoid personal loan scams. It is human nature to want to trust others, but being skeptical and doing thorough research before you act can help protect you from becoming a victim of personal loan scams. Here are some signs of a bad lender to look out for:
- Requires upfront fees. Legitimate lenders do not ask for payment before you can get a loan. Walk away if you encounter a lender that makes this demand.
- Guarantees approval with no credit check. Legitimate lenders can't promise approval without assessing your creditworthiness. Legitimate lenders will review your credit history and income to make sure that you can afford the loan.
- Pressures you to act immediately. Fraudsters will often use high-pressure tactics like "limited-time" offers to push you into making snap decisions. Lenders who are trustworthy will never force you into making decisions on the spot.
- Website is unsecure. Look for security indicators online, especially if your personal or financial information is involved. A lender's website should begin with "https" rather than "http". The "s" in "https" stands for secure, indicating that the website is using a secure sockets layer certificate. Most browsers use other security indicators like a padlock symbol to let you know if a site is secure or not. It's important to note that these indicators are not foolproof and you should always practice caution.
- Contacts you first. Trustworthy, reputable lenders will not cold-call you or arrive at your door. A lender who reaches out to you first could be a sign of a scammer.
What Should You Do If You're a Victim of a Loan Scam?
Taking immediate action is critical if you fall victim to scam. Take the following steps to minimize damage:
- Stop communication with the scammer. It's a scammers job to be tricky. Cease contact immediately to avoid potentially sending more personal or financial information to them than you already have.
- Keep evidence of scam-related correspondence. Emails, text messages, phone numbers, or any other types of communication with the scammer may be helpful to law enforcement. Evidence of scam-related correspondence is also helpful if you need to dispute fraudulent charges with your financial institution, credit card company, etc.
- Report it. You should contact your local police department for information on how to file a report for the fraud. Once the report is filed, request a copy in case you need it as proof of the incident later on. In addition to filing a police report, you should also report the scam to the Federal Trade Commission (FTC).
- Contact businesses where you know fraud took place. This may include your financial institution or credit card company. If you think you're a victim of fraud, notify Members First Credit Union of Florida immediately. Our financial service representatives can advise you on next steps, help to lock or close payment cards to prevent further fraudulent charges, and send replacement cards.
- Check your credit report. If you're a victim of a personal loan scam, it's possible that you're also at risk of having your identity stolen. Comb your credit reports for accounts that you don't recognize to identify potential fraud. By law, you are entitled to one free copy of your credit report once a year from the three major credit bureaus (Experian®, Equifax®, and TransUnion®). If necessary, you can place a fraud alert or freeze your credit to help prevent thieves from opening new accounts in your name.
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