How to avoid a personal loan scam

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

Late repayments can cause you serious money problems. See our debt help guides.

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 legitimate 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.

6 signs of a personal loan scam

  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, this may be a red flag. A scammer typically doesn’t care about your creditworthiness because they’re simply after your personal information. It’s always best practice to check your credit score on a regular basis. Unexpected credit checks could also be an indicator of potential fraud.
  2. You can’t find a physical address. If a lender doesn’t provide a physical address or contact information, this may be a sign that it’s illegitimate. Scammers want to make it difficult for you to get in touch later, thus avoiding any legal action you might want to pursue against them.
  3. 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.
  4. The loan requires payment up front. Loans demanding “processing,” “insurance” or any 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.
  5. 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 may lure you in with guaranteed approval to discourage you from shopping around or so they can collect fraudulent upfront fees. It’s not unusual to come across “pre-approved” loans when you agree to a soft search, but a lender will want to carry out a full, “hard” credit search before making a formal loan offer.
  6. 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 pay with a gift card, and if your lender is pressuring you to do so, you should find a new loan.

6 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 licence information online.
  • Its website is secure. Look for a little padlock to the left of 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.
  • 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.
  • 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.
  • 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.
  • FCA authorisation A good first check to do is to see whether the lender is authorised by the Financial Conduct Authority (FCA). It has an online public record called the Financial Services Register that shows details of firms, individuals and other bodies that are, or have been, regulated by the FCA. If the lender isn’t in that register, then it’s best to stay away from it.
Late repayments can cause you serious money problems. See our debt help guides.

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 National Insurance 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.

Quick ways to see what others say about a lender

  • 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 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 pedalling. Which means that real loans are increasingly hard to tell from the fakes. In the end, knowledge is the best defence against personal loan scams.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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Salman Haqqi wrote for Finder about a range of subjects from holiday destinations to credit cards. See full bio

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8 Responses

    Default Gravatar
    KirstyApril 30, 2019

    They’re asking for my card details and card number security. Is this legit?

      JoshuaApril 30, 2019Finder

      Hi Kirsty,

      Thanks for getting in touch with Finder. I hope all is well with you. 😃

      I can’t provide a straightforward answer to your question, Kirsty. It can be legit. It can also be not legit. It is important to note that many legit lenders request your bank account information to confirm your identity and deposit your loan. However, if you feel like something is wrong, you might want to reconsider your options.

      It would also be a good idea to review the information on this page so you can be better informed and know how to spot scams.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!


    Default Gravatar
    StephanieMarch 30, 2019

    Hi. I have had emails from Aragon Finance and National Loans. Same contact name want upfront fees. I asked why same name. They said both companies are the same. I think fake? Can you advise.

    They attached links which are online however they want my bank account details via email.

      MaiMarch 31, 2019Finder

      Hi Stephanie,

      Thank you for reaching out to Finder.

      I’m afraid we may not be able to confirm whether a lender is legit or a scam but this page can give you tips on how to spot one. Did you apply for a loan from them? If not, it may be a little suspicious knowing that asking for a money to be approved for a loan is one of the signs indicated above on how to spot a loan scammer.

      Always follow your guts and check what other people are saying about the company. If it is very difficult to locate their websites or locations, then it could be a sign for you.

      Hope this is helpful and be safe!

      Kind Regards,

    Default Gravatar
    AnonymousFebruary 4, 2019

    Is My Loan Choice a legitimate loan firm?

      JhezelynFebruary 5, 2019Finder


      Thank you for your comment.

      One of the warning signs on personal loan scam includes the loan requiring payment up front. Loans demanding “processing,” “insurance” or even “origination” fees before approval are a scam. A lender asking for payment before they process your application is a scammer looking for a quick buck.

      Although we do not have a way to determine how legitimate a company is, it is best that you check on the reviews for the lender. Hope this helps.


    Default Gravatar
    KellyNovember 6, 2018

    I got a call off a broker saying my application had been accepted for a loan and with it been a high amount and I didn’t have a guarantor I had to pay £100 to do a secure check to make sure I could repay them each month so I transfered the £100 into their bank as they gave me their sort code and account number and said my loan would take 24 hrs to clear as they have done it through something called a BACS payment I’m just wondering have I been scammed or is this legit I’ve googled them and it is a company I applied with and they have a secure lock on the website email address and contact numbers any help would be appreciated I’ve informed my bank to

      JoshuaNovember 19, 2018Finder

      Hi Kelly,

      Thanks for getting in touch with finder. I hope all is well with you. :)

      Generally, a lender who is asking for an upfront payment is a red flag. While this alone won’t tell you 100% that the lender is a scammer, there are a few things you can do. Check if they have a physical address. Look for reviews and see what people are saying about the company.

      Since you have already sent a payment, you might want to give the company a call. Check with them the status of your loan. If they keep on delaying your loan, then it’s time to be suspicious. When that happens, you might need to seek the help of the proper authority or contact the National Fraud Intelligence Bureau.

      I hope this helps. Should you have further questions, please don’t hesitate to reach us out again.

      Have a wonderful day!


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