Is that preapproved loan offer real? How to detect a scam |

How to determine if a preapproved loan offer is legit

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Dream come true or junk mail? How to tell if that preapproved loan offer is too good to be true.

If you have a credit history, it’s likely that you’ve received one of them: a large envelope with the name of a respected financial institution or some unknown lender promising a great rate on a loan. The best part? You’ve already been preapproved. When you’re considering a new car or gunning to get that renovation going on your house, it may look like a sign.

But can you trust it? With dozens of lenders sending out these marketing tools, you’ll want to learn how to tell the good from the bad.

Credible Personal Loans

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  • Must have good to excellent credit

    What does it mean to be preapproved for a loan offer?

    Being preapproved for a loan means that you’ve met the basic eligibility criteria to apply. It doesn’t guarantee a loan, and because it’s based on a soft credit check with only preliminary information, the lender won’t yet have all of the details required to make a final decision.

    These offers often come unsolicited. They can be from a bank you do business with or an institution you’ve never heard of, and the loan can be for any amount and come with any terms.

    The point of preapproval offers is to sell you a loan. It’s a marketing tool that many lenders, from big banks to local short-term lenders, find effective. While you may be tempted to dive right in, take a step back to fully evaluate the offer and who it’s from.

    Letter in the mail

    Julia received an offer in the mail from a well-known online lender that has preapproved her for a personal loan of $20,000. It included an offer code and a website link to visit along with some qualifying terms. Since Julia was looking to add a swimming pool to her backyard, she decided to look into it.

    Instead of applying right away, she called the lender’s customer service line and asked if the offer was real. Once the offer was confirmed and Julia was sure the lender was legit, she was able to apply online.

    preapproved loan mail offer

    Why am I receiving these loan offers?

    Generally, all you need is a credit history to start receiving preapproval offers in the mail. Creditors can check with different reporting bureaus to learn whether you match the minimum criteria needed to take out a loan. Because your credit can shift monthly, it’s possible to qualify when the lender conducts the pull but not when it makes the offer.

    Certain events might also attract loan offers. It’s not unheard of to receive multiple loan offers if you recently financed a new car purchase or have recently been applying for other forms of credit.

    How to opt out of preapproved loan offers

    Tired of receiving preapproved loan offers? You can opt out for up to five years. Simply visit the FTC-recommended Opt Out Prescreen website or call 1-888-567-8688. To opt out permanently, you can send a written request to the major consumer reporting agencies: Equifax, Experian and TransUnion.

    6 warning signs of a preapproval scam

    Not every letter you get in the mail is honest. If you’ve received an offer that looks suspicious, trust your gut. There are plenty of scams out there. These six signs can help you avoid sinking money into a fake loan offer.

    1. “100% guarantee” There’s no such thing as guaranteed approval. Too many variables can change between when you actually apply for a loan and when you receive an offer. Lenders that advertise this are trying to get you to take out a loan, often with high interest rates and unbearably large fees.
    2. Upfront fees. If a lender requires you to make payments upfront, it’s a huge red flag. There’s never a time where you’ll need to give your credit card information to make a payment before you get funded.
    3. Requests cash payments. Similar to charging upfront fees, a lender stating that you can only pay with cash, money transfers or gift cards is likely running a scam. These are untraceable, and you may not be able to get your money back once you’ve been scammed.
    4. Urgency. Anytime there’s a rush to get you to apply, take extra time to research it. Scammers will try to push you through the loan process as quickly as possible so you don’t have time to determine if something is off.
    5. Hard-to-find or no contact information. Even online lenders have physical addresses and customer service phone numbers. If a lender hasn’t listed a company address or their customer service line isn’t working, skip it and seek another loan.
    6. Unsecured website. If the website you’re accessing isn’t secure, be extremely cautions. Some form of encryption is industry standard to keep your information safe. This may not be a lender scam, but hackers can easily take your personal information if a website isn’t secure.

    Here’s how to avoid a personal loan scam

    Online offer

    Merle found an offer for a preapproved loan in his email. The loan amount was for $10,000, which would cover his backyard renovations with money left over. He was tempted to apply right away but knew it would be better to research first.

    When Merle went onto the lender’s website, he noticed there was no contact information, save for an out-of-service phone number. Rather than risk it, Merle decided against applying. Instead, he compared other lenders and found a good interest rate and excellent term on a legit loan.

    Want to apply for a loan online today? Compare legit lenders

    Rates last updated October 23rd, 2018

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    Name Product Product Description Min. Credit Score Max. Loan Amount APR
    Credible Personal Loans
    Get personalized rates in minutes and then choose a loan offer from several top online lenders.
    Good to excellent credit
    4.99%–36% (fixed)
    Upgrade Personal Loans*
    Affordable loans with two simple repayment terms and no prepayment penalties.
    6.99% to 35.97% (fixed)
    Monevo Personal Loans
    Quickly compare multiple online lenders with competitive rates depending on your credit score.
    3.09%–35.99% (fixed)
    Marcus by Goldman Sachs Personal Loans
    Consolidate your debt or pay off large expenses with competitive rates and no fees.
    Good to excellent credit
    6.99% to 24.99% (fixed)
    Even Financial Personal Loans
    Get connected to competitive loan offers instantly from top online consumer lenders.
    4.99%–35.99% (fixed)
    LendingClub Personal Loan
    A peer-to-peer lender offering fair rates based on your credit score.
    6.16% to 35.89% (fixed)
    Conveniently check your loan options without affecting your credit score.
    9.95%–35.99% (fixed)
    SoFi Personal Loan Fixed Rate (with Autopay)
    No fees. Multiple member perks such as community events and career coaching.
    6.99% to 14.87% (fixed)
    OneMain Financial Personal and Auto Loans
    An established online and in-store lender with quick turnaround times. Poor credit is OK.
    16.05%–35.99%* (fixed)
    NetCredit Personal Loan
    Check eligibility in minutes and get a personalized quote without affecting your credit score.
    34%–155% (Varies by state) (fixed)
    CashUSA Installment Loans
    A connection service for quick cash loans up to $10,000.
    Bad credit OK
    5.99%–35.99% (fixed)

    Compare up to 4 providers

    What to look for in a legit preapproval offer

    So how do you know when a loan offer is legit? There are signs that a preapproval offer is real before you sit down to research.

    • Upfront terms. A real offer will have terms and conditions attached for you to review, even if they’re a mile long. This signals that the lender has rules that you need to follow, which means your loan offer is much more likely to be legit.
    • A name you trust. An offer from a big-name bank or financial institution, especially one you already do business with, is more likely to be legit. However, keep an eye out for inconsistencies. Scammers have designed fake preapproval offers to mimic the look of established businesses.
    • BBB rating. Even if you’re unfamiliar with the lender, Better Business Bureau profile can be a good indicator of legitimacy. Reviews, both good and bad, can be used to gauge the experience of other customers, and accreditation is almost always a positive feature.
    • Easy to contact. You should be able to easily find the lender’s phone number, email and website. When you reach out to talk, the customer service team should be available to answer any of your questions.
    • No promises. There shouldn’t be a guarantee of approval or rates because the lender can’t determine if your credit will remain the same from when you receive the offer to when you apply.

    Phoned in

    When Cassidy received a phone call from a supposed lender offering her a good rate on a loan she was preapproved for, she was immediately suspicious. The lender claimed that her poor credit history wasn’t a problem, and that they’d just need a one-time fee of $200 to secure the loan.

    Something sounded off, so she took down the name of the provider, the phone number and the name of the agent. All Cassidy could find online were reports of random solicitation calls from that number. Not able to find information about the lender, Cassidy rightfully decided not to apply for the loan.

    Bottom line

    An offer for low interest and quick funding might sound tempting, but you should always be prepared to research any preapproval offer your receive. Before acting on the loan, look over the information you’ve received completely. Check for any red flags and listen to your gut if it tells you something is off.

    Even if the offer you receive isn’t legit, there are other legit lenders that offer preapproval online for your to apply with.

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    Even Financial Personal Loans

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    No fees. Multiple member perks such as community events and career coaching.

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