7 signs of a personal loan scam + 5 tips to find a legit lender
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How to avoid a personal loan scam

Not sure what’s a scam or not? Here’s how to protect yourself online.

You can get personal loans from a lot of places these days. If you don’t like your bank or credit union’s terms or have bad credit when applying, an online lender might cater to your specific needs.

But going online comes with a downside: It’s harder to tell a scam from a legit offer. To help you avoid getting ripped off, we cover the signs of a personal loan scam and what you can do to avoid them.

7 signs of a personal loan scam

  • No credit check required. Most legitimate lenders will check your credit to determine if you’re able to repay them: A high score means you repay your debts in full and on time. If a lender isn’t interested in seeing your credit score, be wary. A scammer typically doesn’t care about your creditworthiness because it’s after your personal information.
  • The lender isn’t registered in your state. States require lenders to register for a license. If you find a business isn’t licensed to operate in your state — even if it’s licensed in other states — don’t respond to its lending inquiries. You might have stumbled on a fraudulent website using a business’s name to make money.
  • Your loan offer is incomplete. The Truth in Lending Act requires all lenders to provide the complete terms of a loan, including the final cost of the principal plus interest, before you sign on the dotted line. If your offer lacks details, contains spelling or grammar errors or otherwise raises an eyebrow, it could be a scam.
  • You can’t find a physical address. If a lender doesn’t provide a physical address or contact information, put the brakes on your loan. Scammers make it difficult to get in touch later, thus avoiding any legal action you might want to pursue against them.
  • Your offer is expires soon — and you must act now. If you’re faced with an “urgent offer,” you’ve likely found a scam. Legitimate lenders offer steady rates that depend on your credit. Pressure tactics are designed to drive you to act quickly, before you’re able to spot a scam in progress.
  • The loan requires payment up front. Loans demanding “processing,” “insurance” or even “origination” fees before approval are a scam. A lender asking for payment before it’s processed your application is a scammer looking for a quick buck.
  • You’re guaranteed approval. There’s no such thing as a guaranteed loan. For approval, a lender will typically check your credit and verify your information. Scammers lure you in with guaranteed approval so they can collect fraudulent upfront fees.

How to avoid a personal loan scam

Here’s how to protect yourself from two common scams you might encounter when applying for a personal loan.

  • Phishing scams

Among the most common personal loan scams are those that involve fraudsters “phishing” for your personal or financial information.

In a typical phishing scam, you visit a site or open a form that appears to be from a legitimate lender. You might even speak by phone with a caller claiming the need to “confirm” your loan details. In either case, if the scam is successful, you’re tricked into providing your Social Security number, bank account numbers or passwords, which a scammer then uses to steal your money or identity.

How to avoid being “phished”A key rule of thumb when applying for a loan online is to confirm that you’re on an encrypted page. Look for a padlock to the left of your page’s URL, which itself should start with “https,” indicating a secure site. If you don’t see either, the site you’re on may not be legit.

secure website https

In general, avoid clicking links in any unsolicited email or popup window. If you don’t trust the source of an email or phone call, get in touch with the lender’s customer support directly to ask about the contact.

And if you can’t confirm a lender, an offer or even loan details, walk away and look elsewhere. Better to not have a loan than risk the potential of having your identity stolen and your bank account drained.

  • Advance-fee scams

These simpler scams are sometimes combined with phishing scams. In this case, you apply for a personal loan with a fraudulent lender that asks for you to pay a fee to cover processing costs, insure your loan or even guarantee approval before they’ll process your application.

You’re often asked to pay with a wire transfer or prepaid debit card — payments that aren’t traceable, making for an easier getaway. By then, you’re out money and potentially your identifying personal or financial information.

How to avoid losing your money to a scam
If a lender asks you to provide an upfront fee for any reason, put the brakes on your application. No legitimate lender will ask you to provide money at any point before it processes your application.Some lenders charge an origination fee for their loans, but these fees are typically deducted from your total loan amount.

I got a preapproved loan offer. Is it legit?

You receive a call, email or letter about a “preapproval notice” — but how can you tell if it’s from a real lender?

If the offer is from a known source, like your bank or a well-known lending provider, it could be the real thing. Even so, your best bet is to look up the offer online or call the lender’s customer support. Learn more about confirming preapproval offers.

5 things to look for in a legit lender

Use these tips before signing a contract to be sure you’re dealing with an upstanding business.

  • It’s easy to contact. When you call or email a legit lender, you should be met with decent customer support that’s ready to answer your questions. The lender should also clearly display a physical location and its state licensing info online.
  • It’s website is secure. Look for a little padlock to the left your address bar to confirm the site is safe. Most lenders encrypt the information you send to it online with 128-bit or 256-bit SSL. If a lender doesn’t, move on — no matter how great the offer.
  • It runs a credit check. When you apply for a personal loan, you’ll typically get two credit checks: a soft pull to confirm you exist and a hard pull to see your history. If a lender doesn’t care about this important step in the process, it may not be on the up and up.
  • Its loan terms are clear. A legit lender will provide a transparent contract outlining how much your loan is for, fees you’ll pay, any potential penalty fees, your interest rate, total interest you’ll pay over the life of the loan and the final cost of your loan. It will also detail when you pay, how much and your options — by check or direct debit, for example. If your contract is incomplete, don’t sign it.
  • Reviews and ratings are available online. See what other people say online about this lender. With your research, ask: Are reviews positive or negative? What problems do customers report? Can you even find information on the lender? If you can’t find anything positive — or anything at all — you could be looking at a scam business.

Compare personal loans from legit lenders we’ve reviewed

Rates last updated February 23rd, 2018

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Unfortunately, none of the personal loan providers offer loans for that credit score. If you are in urgent need of a small loan, you might want to consider a short term loan.
Name Product Product Description Min. Credit Score Max. Loan Amount APR
Even Financial Personal Loans
Get connected to competitive loan offers instantly from top online consumer lenders.
580
$100,000
From 4.99% (fixed)
LendingClub Personal Loan
A peer-to-peer lender offering fair rates based on your credit score.
660
$40,000
From 5.99% (fixed)
CompareFirst Personal Loans
An easy-to-use loan connection service geared toward introducing first-time borrowers to affordable personal loans.
580
$100,000
From 2.99% (fixed)
Upgrade Personal Loans*
620
$50,000
From 5.96% (fixed)
Laurel Road Personal Loans
Get a personal loan with no application or origination fees and a rate discount for autopay.
680
$45,000
From 5.5% (fixed)
FreedomPlus Personal Loans
Consolidate debt and more with these low-interest loans. Cosigners welcome.
640
$35,000
From 4.99% (fixed)
Best Egg Personal Loans
640
$35,000
From 5.99% (fixed)
Prosper
Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.
640
$35,000
From 5.99% (fixed)
LendingPoint Personal Loans
Get a personal loan with reasonable rates even if you have a fair credit score in the 600s.
600
$25,000
From 15.49% (fixed)
NetCredit Personal Loan
Check eligibility in minutes and get a personalized quote without affecting your credit score.
550
$10,000
From 34% (fixed)

Compare up to 4 providers

Three quick ways to see what others say about a 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 solid resource.
  • Trustpilot. 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 make out a pretty good picture of how a lender runs its business and what you need to know before applying for a loan.
  • Online forums. Don’t stop with the big review sites. Plenty of online forums like Reddit and Quora allow you to browse customer opinions and crowdsourced answers about lenders and potential scams. Or post your own questions about a lender, and see what customers have to say. If you’re worried that a positive review elsewhere is from a shill, a forum could be a decent alternative for information from people who likely aren’t affiliated with the company.

Bottom line

Scammers put a lot of work into gaining your trust so that you click, share or open what they’re pedaling. Which means that real loans are increasingly hard to tell from the fakes. In the end, knowledge is the best defense against personal loan scams.

To find a personal loans from a trustworthy company, you can compare fees, rates and terms of legit lenders we’ve reviewed.

Have a lender in mind you're unsure about?

See if it’s legit in our lenders safety directory.

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US Personal Loans Offers

Important Information*
Even Financial Personal Loans

Get connected to competitive loan offers instantly from top online consumer lenders.

Prosper

Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

LendingClub Personal Loan

A peer-to-peer lender offering fair rates based on your credit score.

SoFi Personal Loan Fixed Rate (with Autopay)

Borrow up to $100,000 with a competitive APR and no fees.

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