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Personal loan scams: Who is legit?
Here's a breakdown of legit loan companies in Canada, plus 10 warning signs of personal loan scams.
Which personal loan providers are legit?
Peruse the table below to find samples of legitimate loan companies in Canada.
|Loan provider||Is it legit?||Key features||How are they legit||Link to site|
|Higher interest rates than many loans, borrow between $200 and $35,000, same-day approval and funding in many cases||Offers a range of financial products with many positive reviews, though it has some negative reviews for its personal loans.|
The company has been featured in The Globe and Mail, BNN and CBC.
|Go to siteRead review|
|Search multiple loans at one time, interest rates as low as 9%, amounts up to $50,000.||LoanConnect vets all of the loan providers it works with to make sure your money is safe. It also has a dedicated customer support and large customer base.||Go to site|
|Search multiple loans at one time, amounts from $300 to $50,000, interest rates starting at 8% for unsecured loans||Loans Canada only works with financial service providers that adhere to Canadian laws and regulations.||Go to siteRead review|
|Higher interest rates than many loans, reserved for people with decent credit, borrow up to $25,000 in as little as 24 hours.||Dedicated in-person branches with over 240 locations across Canada, very well-established (in operation since 1923)||Go to siteRead review|
You can find other legitimate loan companies in Canada by searching for companies on Google or by using a personal loan broker to connect to legitimate lenders near you.
10 signs of personal loan scam
Make sure you work with legitimate loan companies in Canada by learning how to spot personal loan scams. Avoid the following when deciding on a lender:
1.The lender requires you to pay for fees upfront.
Lenders that ask you to pay processing, insurance or origination fees as a condition of loan approval are operating a scam. Legitimate loan companies in Canada won’t ask you to pay any additional fees until your application is processed and you have received your loan.
2. The lender isn’t registered in your province or territory.
Provinces and territories require legitimate loan companies in Canada to register their financial businesses. If the lender you want to use isn’t licensed to operate in your province or territory — even if it’s licensed in other provinces or territories — then you should choose another lender to avoid potential personal loan scams.
3. Your loan offer is incomplete.
Loan companies in Canada are required to provide a loan contract that outlines the terms of your loan and the total cost you’ll pay with interest. If your offer is missing important information, contains spelling or grammatical errors or otherwise raises red flags, it could be a scam.
4. You can’t find a physical address.
If you can’t find a physical address or contact information on the lender’s website, put the brakes on your personal loan. If there is contact information on the website, you may want to search for the address or call customer service to ensure that the info provided actually belongs to a legitimate lender.
5. Your offer expires soon — and you must act now.
Most offers that are categorized as “urgent” can be written off as personal loan scams. Legitimate loan companies in Canada offer steady rates that depend on your credit score and finances. High-pressure sales tactics are designed to drive you to act quickly, often before you’re able to spot other red flags.
6. No credit check required.
Most legitimate loan companies in Canada will perform a credit check to make sure that you can reliably handle your loan repayments. Be wary of lenders that offer no credit check loans unless they have other means of verifying your ability to repay. For example, some lenders will require you to provide proof of income instead of a credit report.
7. You’re offered guaranteed approval.
Many personal loan scams involve the offer of a “guaranteed” loan with no background check. Legitimate loan companies in Canada won’t offer you a loan without first verifying your identity and assessing your creditworthiness. This helps them follow up with you if you default on your loan payments.
8. Unsolicited contact.
Loan scams can come in many forms – including social media requests, emails and even flyers to your mailbox. If you’re interested in a loan offer, make sure to do your own digging online to double-check that the company offering the deal is legitimate. If you can’t find the lender’s website, social media profiles or online reviews, it’s likely a scam.
9. No examples of fees, interest or costs
If a lender doesn’t list its interest rates or fees online – or provide them over the phone when you call — you could be dealing with a scam. Most legitimate loan companies in Canada will provide you with a quote for prices at the very least. Avoid working with lenders that aren’t transparent about how much your loan will cost.
10. Asks for payment in the form of a gift card.
Paying a lender with a gift card is the same as paying with cash — once the money has been used, it’s nearly impossible to trace or get back. Legitimate loan companies in Canada won’t ask you to pay with a gift card. If your lender is pressuring you to do so, you should find a new lender.
What to do if you're the victim of a scam
Personal loan scams are often very sophisticated and can happen to anyone. If you suspect that you’re the victim of a loan scam:
- Call your local police. File a police report for the amount you’ve been defrauded.
- File a complaint with the CAFC. Contact the Canadian Anti-Fraud Centre (CAFC) to lodge a complaint about a specific provider. Call toll-free at 1-888-495-8501 or file a complaint online at the Fraud Reporting System (FRS).
- Call Crime Stoppers. Contact Canadian Crime Stoppers at 1-800-222-8477. You can also submit a tip about personal loan scams online using the Webtip service.
How to find legitimate loan companies in Canada
Before signing a loan contract, consider these tips to be sure you’re dealing with a legitimate lender.
- Easy to contact. You should be able to easily access the lender’s phone numbers, email addresses, in-person building locations and business licensing information online.
- Secure website. Most lenders encrypt the information you send online with 128-bit or 256-bit SSL. Look for a little padlock to the left of your address bar to confirm the site is safe.
- Lender asks for a credit check. You should expect legitimate loan companies in Canada to check your credit. This can be through a soft pull on your credit to verify your ID or a hard pull that verifies your credit score.
- Solid customer reviews. Double-check customer reviews online to see if the lender you want to work with is trustworthy. Just be mindful of reviews that are all positive or all negative. You should also be wary if a lender has very few reviews as it may be difficult to assess its legitimacy.
- No upfront fees. Legitimate loan companies in Canada won’t charge you any fees until you receive your loan — though some might deduct an origination fee from the funds before it shows up in your bank account. This should be clearly outlined in your loan agreement if it does occur.
- Clear loan terms. The terms of your loan should be clearly outlined in your loan contract. Double-check that all of the information provided to you verbally is included in writing as well. If anything is missing from your loan contract, avoid signing it until it reflects all of your loan information.
What information should be included in my loan contract?
Legitimate loan companies in Canada should include the following information on your loan contract:
Common types of loan scams to avoid
Here’s how to protect yourself from two common scams you might encounter when applying for a personal loan: phishing scams and advance-fee scams.
Phishing scams are used to collect your personal information to access your bank account or steal your identity.
|Phishing scams usually:|
|How to avoid this type of scam|
Advance-fee scams demand that you pay an upfront fee before your application is assessed or before you can access the funds you’ve been approved for.
|Advance-fee scams often:|
|How to avoid this type of scam|
Four quick ways to verify an online lender
Visit these sites to help you verify an online loan lender:
- Better Business Bureau (BBB).
The BBB is an independent nonprofit dedicated to strengthening relationships between businesses and customers. It rates how a business works by analyzing customer reviews and complaints, allowing businesses to respond with a resolution. A leader in consumer ratings, the BBB is a reliable resource.
A Danish company, Trustpilot is another consumer-run review site with some 500,000 new customer reviews published monthly. Combined with the BBB, you can create a pretty good picture of how a lender runs its business and what you need to know before applying for a loan.
- FCAC or CCFA complaint database.
The Financial Consumer Agency of Canada (FCAC) and the Canadian Consumer Finance Association (CCFA) are government-run agencies that help you search for complaints from current and former customers. You can also look into whether these agencies have taken legal action against the lender that you’re interested in.
- Online forums.
Don’t stop with the big review sites. Plenty of online forums like Reddit and Quora allow you to browse real customer opinions and crowdsourced answers about lenders and potential scams. Or, post your own questions about a lender and see what other customers have to say.
Compare legitimate personal loans companies in Canada
There are a number of legitimate personal loan companies operating in Canada. These include the following loan providers:
Personal loan scams are becoming more common and more sophisticated, which means it’s important to know how to protect yourself. Learn more about how you can recognize personal loan scams as well as who you can report them to. You can also use this post to compare legitimate loan companies in Canada.
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