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Fake Loan Companies

29 min.

The demand for unsecured loans has increased this year. Scams could also be on the rise. A personal loan may be the best option if you need money fast to pay an unexpected cost.

Fake Loan Companies

Though you should verify that you are dealing with an actual lender and not a con artist, read this article to learn how to recognize fraudulent loan offers and consider the list of fake loan companies.

How to Determine if the Loan Company is Fake

  • It is too Good to be True. Any personal loan or credit card offer that seems too good to be true is likely to be just that. Legitimate loan companies will not cold call you and offer you a loan. They know you cannot refuse. Most loans with low interest rates need an application and a hard credit check to see if you qualify.
  • The Creditor has yet to Find a Known Physical Location. It would help if you asked for a physical address from every potential lender. Check it out on Google Maps. Address verification is essential because some scammers try to get personal loans to give lessons that are empty lots. If there is no physical address listed for the lender, you should look elsewhere. Unfortunately, there are a lot of scam companies that are impossible to find and cannot be sued because of this.
  • The Lender Ensures Approval. Honest lenders are out front about checking credit reports and may even pull information from the three major credit bureaus (Equifax, Experian, and TransUnion). Legitimate personal loan lenders usually look at borrowers' past payment records to see how seriously they take their obligation to repay loans. Companies intent on personal loan fraud do not care about your credit score. They generally look for high-risk customers more likely to default on their payday loans and charge exorbitant late fees and penalties.
  • Lenders Communicate via Phone, Mail, or Personal Visit. Be wary of any loan offers you receive via phone, mail, or door-to-door. The Federal Trade Commission (FTC) has declared it illegal for businesses in the United States to make loan offers over the phone and demand payment in advance. As such, you have broken the Telemarketing Sales Rule. It is not against the law, however, for lenders to send out generic advertisements to customers by email. Con artists will resort to anything to get their hands on your money, including posing as a reputable financial institution. The FTC warns that fraudsters frequently alter the caller ID information displayed on target devices to make it appear that the call is coming from a legitimate business.
  • The lender requires prepaid credit cards or other payment methods. Lenders' bank account details, prepaid debit cards, or gift cards are among the things fraudsters have been known to demand. Cons often require personal information for insurance, collateral, or payments. This whole thing is a con. Fees for applications, appraisals, and credit reports are standard practice at legitimate financial institutions, but borrowers may expect to see those costs rolled into their APR. Warning signs abound when someone uses a prepaid card. It is nearly as untraceable as cash and cannot be reported stolen once transferred to a lender. For those willing to divulge their banking information, you can file a dispute with their bank or credit union. However, investigating their claim may take some time. Furthermore, it is possible that you will not be able to get your stolen money back.
  • Lack of a valid state license to operate as a lender. Lenders and loan brokers are subject to FTC mandates to obtain state registration to do business there. Before doing business with a potential lender, you should check its website to determine if it holds the necessary licenses to operate there. Personal loan scams are possible if the state where you live is not on the lender's list of registered conditions. You can weed out scammers and deal only with real businesses by verifying registration information.
  • Lend urgency to demanding action. Always give in to a true sense of urgency. Personal loan scams are easy to spot because they try to get you to agree to a loan in a concise amount of time, usually less than a day. If you do not answer quickly, the lender may threaten to do something drastic, like take away your driver's license or file a lawsuit against you. High-pressure lenders may need better intentions. It could be an attempt to pressure you into acting quickly so you will not have time to complete the necessary due diligence and expose the scam they are operating.
  • Lenders' pricing practices are hazy. The cons will not openly disclose their prices or even mention them when asked. It's also possible that they will claim your loan is approved but demand payment in advance before proceeding. Although some legitimate lenders may not publish their rates and fees online, they should inform you of these costs before you apply. After a loan is approved, unanticipated costs added on later might raise red flags. If a business requests money up front and explains that it is for "processing," "insurance," or "paperwork," the FTC advises you to run away.

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Types of Loan Scams

Debt Settlement Scams

Debt settlement companies say that they can negotiate for your debts to be reduced to "pennies on the dollar" or canceled. Their job is to talk to your debtors and try to get them to alter the terms of their agreements with you. While there are honest businesses in the debt settlement industry, scam artists can be just as easy to fall for. Alternatively, you could use a lower-interest personal loan for debt consolidation if you have good credit.

Phishing Scams

Phishing is a type of email fraud that scammers use to steal personal information like passwords, bank account numbers, and credit card numbers. Phishers use social engineering to manipulate people emotionally and get them to reveal sensitive information. They could do this by hiding dangerous software in an email attachment and getting you to download it. Scammers often send emails that appear to come from a trusted organization. The wording used is typically threatening in an attempt to gain a response quickly. For example, they may threaten to freeze your accounts if you do not provide information immediately. If a fraudster manages to get their hands on your personal information, they can steal your money or your identity without you even realizing it.

Advance-fee Loan Scam

The fraudster contacts you and promises a low-interest personal loan if you pay some costs upfront. People often use the terms "application fee," "origination fee," and "processing cost" to describe these costs accurately. Once they have your attention, the con artist will demand payment via a non-standard method. They will offer to roll the fee into the loan if you state you do not have the funds upfront, and then they will send a bogus wire transfer to your account for the whole amount. Because reputable lenders often add fees to the total cost of personal loans when customers cannot pay them off all at once, this is a sneaky way to do business.

Government Imposter Scams

Scammers who contact you through phone or email, pretending to be from the government, will sometimes use official-sounding government email addresses or phone numbers. They will threaten you with dire consequences unless you immediately give them your private information or money. Government scams, already prevalent during the height of the epidemic, grew to include free vaccinations, purported COVID cures, and fast-tracked stimulus payments.

Bogus Check Fraud

A phony check scam is when a con artist contacts you and asks you to wire money after depositing a check, cashier's check, or money order they purportedly sent you. If you give in, the bill they send you will eventually bounce, and by the time you find out, the fraudster will be long gone with the money you wired them.

Donation or Charity Scams

Scammers who take advantage of the weak by pretending to be from organizations in times of trouble are among the unluckiest people who commit fraud. Con artists who ask for money or pretend to be charities have a lot in common with those who use phishing and advance-fee lending scams. Crowdfunding is becoming more and more popular, and more and more real charities are starting up. It makes it harder to tell the difference between real and fake groups. If someone is approaching you for a financial contribution, do some background reading on them beforehand.

Who do Fake Loan Companies Target?

Scammers prey on those who are either naive about the process or need help obtaining a loan through more traditional channels. The elderly, those with poor credit histories, and those carrying significant debt are particularly vulnerable to these schemes.

People with bad credit may prefer payday and no-credit-check loans since they may be charged higher interest rates on personal loans from more traditional lenders. Regrettably, some con artists buy the names of people who have searched for or applied for such loan products online since they are easy targets.

What to Do if You Have Been Scammed

One can still fall prey to personal loan scams even if taking these extra measures. In the event of fraud, please proceed as follows:

  1. Gather evidence. Make sure to keep track of every communication and agreement about the loan, whether over email, snail mail, or the phone. If necessary, you should also provide bank statements as proof.
  2. Report this to the local police. You may use this document to demonstrate that you were the victim of loan fraud at several institutions.
  3. Notify relevant agencies. After reporting the crime to the police, you should also file a complaint with the Consumer Financial Protection Bureau (CFPB), the Federal Trade Commission (FTC), the Better Business Bureau (BBB), and your state attorney general. It is possible that these groups can assist you in recovering your funds or, at the very least, stop scammers from victimizing anyone else.
  4. Review your credit report. Verify your credit report and score if you gave out personal information (such as your SSN and bank account number) to be sure they did not steal your identity. You can utilize a service online to check your credit reports at all three bureaus. Just in case, you may want to freeze your credit as well.

How to Choose a Legitimate Lender

Despite having less-than-perfect credit, legal lending options are still available to you. You can tell you are not dealing with a personal loan scam or a fake business by looking for these things in a legitimate lender.

  • The lender has Better Business Bureau accreditation. To get the Better Business Bureau's approval, a business must be evaluated extensively. As a borrower, you may rest easy knowing that an approved lender works with you in good faith to resolve any problems.
  • The lending institution enjoys a good reputation online. Checking customer reviews and news articles for any mentions of complaints is a simple first step to take if you are on the fence about a particular lender. Ignore the market if it consistently delivers dissatisfied customers.
  • Three credit bureaus receive lender reports. Your lender is not obligated to record your payments to the credit bureaus, but doing so is a positive indicator of your financial responsibility. Loans with lower interest rates and better loan terms may become available to borrowers who demonstrate responsible financial habits by making all payments on time.
  • The lender gives you a sensible loan. Most reputable lenders will look at your employment status, income, and credit history before approving you for a loan. Thus, a reliable lender will typically only grant a loan the borrower can repay. However, you should examine your financial situation to determine if taking out a loan is a good idea. It is essential to borrow from a reliable source, but going into debt and not paying it back can lead to steep fines and interest.

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Which Loan Apps are Frauds?

According to a report by Trend Micro, some of the Android apps available for download are dangerous. They are used to spy on people's phone calls, texts, photographs, videos, audio recordings, locations, and other personal information. Some harmful loan apps that have been found are:

  • LoanSathi—Personal Loan App,
  • Raise Cash—Instant Lending,
  • Rich Cash—Mobile Rupee,
  • Secure Loans Apps—Wallet Payee,
  • INDLoan
  • ListoFectivo—Prestamo Rápido.

How do loan scams work?

A loan scam occurs when money is borrowed under fictitious conditions. Con artists often make big promises they do not plan to keep or hide the actual loan amount to get their victims to trust them. Scammers in the loan business will do anything, like using fake company logos and caller ID numbers, to get their victims to trust them.

What is loan spam?

Getting a loan through loan spam means you were given the loan through shady means. To lure in their victim, con artists will frequently make extravagant promises that they have no intention of keeping or will attempt to conceal the loan amount.

How do I report a loan scammer?

Fraud reports are typically sent to the Federal Trade Commission (FTC). Use the FTC's online form or call 1-877-382-4357 to report fraud (9:00 a.m.–8:00 p.m., ET). The FTC handles complaints against several types of fraud, including the following: Contact through telephone.

Can someone open a loan in my name?

Fraudsters can use your personal information to get a loan in your name and ruin your credit score. A SIM card can be purchased and then used fraudulently. After they are done, you must provide evidence of identity theft. Fraudsters frequently alter identity documents.

What happens if you lie for a personal loan?

You risk not just jail time but also losing your loan money, which might mean never seeing the money again or paying back the total amount. When applying for a personal loan (or any credit), you should always tell the truth and keep the lender up to speed on any changes in your employment or income.
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