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How to avoid a personal loan scam
Not sure if your lender's legit? Here's how to protect yourself.
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 it can be harder to tell a scam from a legit offer. Know what red flags to look out for and compare lenders before making a decision.
8 signs of a personal loan scam
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1. 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.
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2. 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.
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3. 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.
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4. 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.
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5. Your offer 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.
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6. 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.
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7. 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.
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8. 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. No legitimate lender will ask you to pay with a gift card, and if your lender is pressuring you to do so, you should find a new loan.
I think I’ve been scammed. What should I do now?
If you believe that you’re a victim of fraud or scam, you should visit the Federal Trade Commission’s (FTC) complaints page. On the page, you can choose your complaint category on the left-hand side. While the FTC can’t resolve individual complaints, it can direct you to the proper bureau to file a complaint or provide you the correct information on how to protect yourself.
6 factors to look for in a legit lender
Use these tips before signing a contract to be sure you’re dealing with an upstanding business.
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1. 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 information online.
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2. 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. A great offer isn’t worth risking your personal info.
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3. 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’s likely not legit.
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4. Its loan terms are clear.
A legit lender will provide a transparent contract outlining how much your loan is for, the fees you’ll pay, any potential penalty fees, your interest rate, the total interest you’ll pay and the final cost of your loan. It will also detail when you pay and your payment options. If your contract is incomplete, don’t sign it.
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5. 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 find information on the lender? If you can’t find anything positive — or anything at all — you could be looking at a scam business.
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6. Three are no upfront fees.
Legit lenders generally never charge anything until you receive your loan — though some might deduct an origination fee from the funds before it shows up in your bank account.
Compare personal loans from legit lenders we’ve reviewed
Updated January 24th, 2020
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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.
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.
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.
4 quick ways to see what others say about a lender
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1. 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.
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2. 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.
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3. CFPB complaint database.
The Consumer Financial Protection Bureau (CFPB)’s complaint database is another place to search for warning signs. You can search for “complaint narratives” from current and former customers by company name and date the CFPB received the complaint. You also might want to look into whether the CFPB has taken action against your lender.
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4. 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.
Lenders to be wary of
You might want to do some extra research and fully read your contract before you get a loan from one of these lenders. While they might not be a scam, they raise some red flags:
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Concourse lending.
Red flag: The BBB gives this lender an F rating. It warns consumers that its mailers don’t fully disclose the terms of new loans according to FTC regulations. Concourse lending has failed to respond to the BBB.
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Glider Lending.
Red flag: The BBB gives Glider Lending an F rating based on the fact that that it hasn’t been able to verify the address of this lender. The BBB also hasn’t been able to reach out to staff for basic information about its programs and business owners.
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Quality solutions.
Red flag: Several have reported on the FTC website that they received phone calls about loans they hadn’t applied for from Quality Solutions. It’s likely that Quality Solutions itself is legit — it gets an A+ from the BBB and other customers report having a good experience. But be wary of unsolicited phone calls from companies posing as this lender.
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.
Frequently asked questions
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Ask an Expert
I was told i was approved for a 5000 dollar loan when I called they wanted me to take a picture of my check front and back and e mail it to them. Then I was suppose to start on line banking. Is this legit
Hi Sharon,
Thanks for getting in touch!
Normally, lenders don’t ask for a photo of your physical check otherwise stated in their application criteria. Best to check those carefully before proceeding to the loan.
Hope this helps! For any further questions, feel free to reach out to us again, we’re here to help.
Best,
Nikki
I was a approved for a 2000.00 loan and part of the agreement is they transfer 400 into my checking and I’m suppose to get a visa gift card and transfer the 400 back they say it’s for the purpose of customer legitimacy as soon as it’s transferred they will transfer the full 2000” Is this a legit company it’s Eloan.com or EZloanllc
Hi Rob,
Thanks for getting in touch!
Upon checking, our pages don’t have Elaon.com or EZloanllc. Also, many legit lenders request your bank account information to confirm your identity and deposit your loan. But if you suspect that a lender is illegitimate or conducting a scam, go with your gut. Avoid giving out or entering your bank account information online, choosing to call them directly instead.
Hope this helps! For any further questions, feel free to reach out to us again, we’re here to help.
Best,
Nikki
I just wanted to add dinner more thing. I was unfortunately in a bad shape and someone calls offering a loan I should have known it sounded too good to be true but at the time I owed so many medical bills the thing that I did wrong was to give out my username and password call my bank account. Never never never ever give out your username or password to your bank account if they want your routing number and bank account number that’s fine but once you give them your username and password you are screwed it wound up costing me hundreds of dollars to get out of this. It seems like once I turn 60 years old all the scam started aspire beware that’s all I can say I hope I save somebody a whole lot of trouble with this information.
I got a call back on a online loan from E loan financial and rhe guys name was Wilbert Johnson but sounded like he was Asian ? Asked for account and routing #’s but also my online mobile ID and password from my checking account i use on my emerald card thru H&R block who use Axos bank as their bank, i went on the e-loan website filled out the online app and wasn’t approved for the same amount, is this common and my info not logged as an account because it wasn’t finalized or is this a lil fishy?
Are payday or installment online loans legal in the state of PA? also are prepaid debit card loans legal in PA?
Hi Ray,
Thank you for reaching out to Finder.
Payday loans are illegal in the state of Pennsylvania. You may want to check on lender’s backround first via customer feedback and reviews before applying for a loan with them. No. Under 63 Penn Stat. Ann. § 2325, check cashers are prohibited from lending short-term loans. You may want to check options available for you in Pennsylvania by clicking this link to go to our Finder page. Kindly review and compare your options on the table displaying the available providers. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you.Hope this helps!
Cheers,
Reggie
I am seeking for a modest private loan (10’000 €},but, living in Switzerland, I cannot obtain any loan from this country since my old age (74) prevents that absolutely. So I must find an international loan, but, so far, I could only find scammers in this area. Do you know real international lenders granting private loans?
Hi Patrick,
Thank you for reaching out to Finder.
I do apologize but we do not have an article specific to getting a private loan from an international lender. But to avoid getting scammed, it is advisable to reach out to reputable lenders or banks available in your area. There are a lot of types of loans that they may approve for you like a secured or unsecured loan. Hope this helps you.
Cheers,
Reggie
My friend got personal loan approval . But the lender say borrower need to have cash in borrower account to activate the cheque . In simple word they want you to have some amount in borrower account for credibilty or something like that .
Hi Afif,
Thank you for reaching out to Finder.
The page provides us with things to watch out for to avoid a personal loan scam. You may want to read through this and compare it with the loan provider that your friend mentioned. The easiest would be checking for reviews of this loan provider via the internet to see if they are credible. Hope this helps!
Cheers,
Reggie
Please, I need to know is freedomloan.co.uk is a legit loan company. Thanks!
Hi Owolabi,
Thanks for getting in touch with Finder. I hope all is well with you. 😃
Upon checking, Freedom Loan’s website looks legit. They also provided an address for you to visit. Best is for you to get in touch with them personally and get a feel whether they are legitimate or not. Ask for credentials to further prove their legitimacy. As of now, I’m afraid that I can’t tell you certainty whether Freedom Loan is legit or not. You would need to do your independent research.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua
Somebody called and said I was approved for a loan. But they asked for my user name and password. It doesn’t sound legit! Is it a scam?
Hi Josh,
Thank you for reaching out to Finder.
Do not provide your personal details on your account to anyone. You may however check with the company itself by calling their customer service number to check the legitimacy of your approved loan. You may also check the web on the loan provider’s reviews and user feedback. Hope this helps!
Cheers,
Reggie
Is Easy Payment Loans legit? I did pay for insurance. They are asking for a tax payment because it is an out of state loan.
Hi Greg,
Thanks for reaching out! As it says on our page, “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.”
Also, we don’t have information on Easy Payment Loans at the moment. We highly suggest doing thorough research before transacting with them. As a friendly reminder, review the eligibility criteria of the loan before applying to increase your chances of approval. Read up on the terms and conditions and product disclosure statement and contact the bank should you need any clarifications about the policy.
Hope this helps!
Best,
Nikki
Hi
I received an offer from Loan Raft Finance for $30,000/- with very simple terms and conditions, but they asked me to pay $500/- by Cashier Check or Money Order being processing and legal fee.
Could you please let me know the rating and reputation of that company and advise me prior to signing with them.
Hi Zubair,
Thanks for getting in touch with finder. I hope all is well with you. :)
One of the red flags that you should watch out for is when a lender ask money upfront. I have also checked their website and could see that it is not a secure website. Please be cautious and make a deeper research about this company. You can also review the signs of scams on our page to learn more.
I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.
Have a wonderful day!
Cheers,
Joshua