Warning signs — and how to find a legitimate personal loan.
The Federal Trade Commission (FTC) reported that consumers lost over $1.9 billion in 2019. Because it can be difficult to tell a scam from a legit offer, make sure you know the warning signs and common red flags of a scam. Like everyone says: If an offer too good to be true, then it’s probably a scam.
What are personal loan scams?
A loan scam is a fraudulent offer for a personal loan. This is done either to gather information like your Social Security number or to convince you to pay for a product you won’t receive. In general, loan scammers will present themselves like legitimate personal loan lenders. But certain clues, like a missing physical address, can be good ways to spot a fake loan.
Common personal loan scams
Phone calls and social media messages are common ways for a scammer to contact potential victims. If you’re ever asked to pay a fee before receiving funds, enter personal information onto an unsecure website or offered a loan you didn’t request, you might be facing a scam.
Advance fee scams
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 this will be deducted from your loan amount before you receive your loan funds. An origination fee should never be paid out of pocket.
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 the scammer will process your application.
You’re often asked to pay with a wire transfer or prepaid debit card — or any payment method that isn’t traceable. This makes it almost impossible to get your money back.
Phishing scams
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.
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.
Who is most likely to be researching personal loan scams?
Finder data suggests that women aged 45-54 are most likely to be researching this topic.
Response
Male (%)
Female (%)
65+
7.36%
7.96%
55-64
8.16%
8.81%
45-54
9.51%
9.86%
35-44
8.71%
9.21%
25-34
9.36%
8.21%
18-24
6.76%
6.06%
Source: Finder sample of 1,997 visitors using demographics data from Google Analytics
10 signs of a personal loan scam
Personal loan scams are designed to trick unsuspecting victims — but there are common ways to spot a scam. Make sure your lender is upfront. If you spot a red flag, don’t give away your information or money.
Most legitimate lenders will perform a credit check to determine if you’re able to repay them. 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. And even if a credit check isn’t required, your lender should at least request proof of income.
2. The lender isn’t registered in your state
The FTC requires lenders to register for a license in each state it offers loans in. 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.
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 a sign of a potential 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. Scammers make it difficult to get in touch later, thus avoiding any legal action you might want to pursue against them.
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 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. 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.
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.
8. Contacts you out of the blue
Loan scams frequently show up on social media, in email and in your mailbox. There are some lenders that perform a soft credit check to see if you can prequalify for a loan. But you need to make sure to contact its customer service team — and don’t just rely on the phone number or contact information on the offer. Do your own digging, and if you can’t find it on the lender’s website or its social media profiles, it’s likely a scam.
9. No examples of fees, interest or costs
Scammers may build a realistic website designed to throw you off and submit your personal information on a fake loan application. But if a lender doesn’t list its interest rates — or provide them over the phone when you call — and encourages you to submit for preapproval to find out, be wary. This isn’t a red flag on its own, but combined with other warning signs, you might want to check out other loan companies instead.
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. No 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.
What to do if you’re the victim of a personal loan scam
If you believe that you’re a victim of a personal loan scam, there are a few steps you can take to report the crime — but it may be difficult to get your money back.
File a complaint with the FTC. While the FTC can’t resolve individual complaints, it can direct you to the proper bureau to file a complaint.
File a report with your state attorney general’s office. Your state attorney general’s office keeps tabs on potential loan scams and works to build a case against scammers in your area.
Call your local police. File a police report for the amount you’ve been defrauded.
Contact the Internet Crime Complaint Center. This partnership of the FBI and National White Collar Crime Center is for victims of fraud that began with Internet contact.
How to find a legitimate personal loan
Use these tips before signing a contract to be sure you’re dealing with an upstanding business.
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 or P.O. Box and its state licensing information online.
Secure website. 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.
Runs a credit check. When you apply for a personal loan, a lender will pull your credit report to confirm you can repay a loan. Even if your lender works with bad credit, it should still perform this step to verify your identity and financial history.
Clear loan terms. Your lender should provide a transparent contract that outlines the amount you’re borrowing, 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 should also detail when you pay and your payment options. If your contract is incomplete, don’t sign it.
Reviews and ratings are available online. See what other people say about this lender. Loan companies frequently have pages on Trustpilot or the Better Business Bureau (BBB) website. Missing reviews — or highly negative reviews — can be a sign that you want to avoid the loan.
No upfront fees. Personal loans never ask for money upfront. And while lenders may charge an origination fee, this should be deducted from the total loan amount before you borrow. Application fees and other charges are rare, so avoid them when you can.
CFPB complaints. 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 or the date the CFPB received the complaint. You also might want to look into whether the CFPB has taken legal action against the lender in the past.
Scammers may seem legit on the outside because they put a lot of work into gaining your trust. This means that real loans are increasingly hard to tell from the fakes. To find a personal loans from a trustworthy company, you can compare fees, rates and terms of legit lenders we’ve reviewed.
In the end, knowledge is the best defense against any loan scams. Learn the warning signs for business loan scams and debt collector scams to protect yourself.
Frequently asked questions
Our answers to more questions you might have about personal loan scams.
I got a preapproved personal loan offer. Is it legit?
It could be. There are plenty of legitimate lenders that run your credit report and give you an estimated interest rate on a personal loan. We’ve collected tips to help you identify legit preapproval offers — but in general, only submit your information to websites you know are legit.
A lender asked for my banking information. Is this legit?
It depends. Many legitimate 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 entering your bank account information online, choosing to call them directly instead.
Kellye Guinan is a freelance editor and writer, specializing in consumer lending. Her writing and analysis has been featured on Bankrate, MSN and MediaFeed. She holds degrees in anthropology and German language and literature from Middle Tennessee State University.
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 .
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!
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.
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!
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.
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.
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.
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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