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schedule 4 min read | May 26, 2024

6 Warning Signs of Online Loan Scams

Written by Daniel Azzoli

There are plenty of reasons why you might feel like you could use a loan. But where there are people in need, there are also people on the prowl, looking to take advantage of the situation. It’s because of these people that you need to keep your eyes peeled for loan scams.

The consequences of running into online loan scams can be serious, so take your time to go over any offers for loans that might come your way and look for potential warning signs. What are these warning signs though? Well, today we’re going to take a look at some of the big ones and go over what you can do to look for legitimate online loans.

What are Loan Scams?

Broadly speaking, loan scams are fake offers for personal loans which are meant to gather your personal information, and ask you to pay for false loan fees, without you ever receiving any money.

When it comes to these types of scams, you might run into fake companies telling you they’ll lend you money without verifying your financial information, or they could just reach out to you with an offer for a loan you didn’t apply for. Scams are constantly evolving and increasingly sophisticated. It’s often hard to know what a scam is and what’s legitimate.

6 Signs That You Might be Facing a Loan Scam

Let’s take a look at some of the main warning signs for you to keep an eye out for.

1. You're Asked to Pay with a Prepaid Card or Gift Card

An important thing to look out for is the method of payment the lender is asking for. If they ask for you to pay with a gift card or a prepaid card, or if they ask you to send money directly to a single person, keep your guard up. Transactions made through your bank account are traceable, and it’s usually the method legitimate online loan lenders are going to use. When you’re dealing with loan scams, the people trying to scam don’t want to leave a trail, so that’s why they’ll ask for unusual forms of payment like the ones we mentioned.

Want to learn more about the characteristics of a responsible online lending company? Click here!

2. Their Website is not Secured

This is a good thing to look out for when you’re browsing any website, but it’s especially important when you’re considering sharing your personal information. To show that a site is secure, it should have a little lock symbol at the far left of your browser search bar. On top of that, the URL should start with an “https” instead of just “http”. If the lender’s site is missing one or both of these things, it might be a signal that any personal information you share is at risk of being stolen.

3. You’re Being Offered a Guaranteed Loan

You know how the saying goes: there are no guarantees in life. It might not apply to every scenario, but it’s definitely true when it comes to online loan offers. If a lender gives you a guarantee that they’re going to give you money right away, be on your guard. There’s always an element of risk involved when a financial institution lends money. When it comes to legitimate online loans, a financial institution will always do its due diligence to assess you as a borrower. This could mean they check your credit score, ask for proof of income, or a number of other things.

4. The Financial Institution is Putting on the Pressure

The role of a lender is to get you the money you need when you really need it. It’s not to force people into taking on debt they can’t afford. If you feel like you’re being pressured into making a decision or you’re given a strict deadline to decide, you may be walking into a loan scam.

Click here for some tips on how you can start to pay off your debt effectively!

5. The Rates and Terms of the Loan Aren’t Clear

Another important feature of a legitimate lender is transparency. They should always be clear about their rates, terms, privacy policies, and any important details about your loan and what they do with your personal information. If they’re not disclosing these things up front, it might be a sign of an online loan scam.

6. You’re Asked to Start Making Payments Before Receiving Your Funds

When you’re borrowing money, you should get it before you’re expected to make any payments towards the loan. If you’re asked for any sort of up-front fees or advance payments, think twice about this offer. While a legitimate lender might charge fees in general, they’ll be transparent about what these charges are.

Look for Legitimate Online Loans

We’ve spoken about what to look for to avoid loan scams, but what do you look for when you’re looking for legitimate online loans?

Here are some of the key features you should be looking for to recognize legitimate loans.

What to look for in a legitimate loan

What You Should Do if You Think You’ve Been Scammed

If despite your best efforts you fall victim to online loan scams, there are some things you can do that may help to stop the bleeding.

First, you can file a complaint to the Federal Trade Commission (FTC)[1]. You can then file a complaint with the Internet Crime Complaint Center, which is operated by the FBI[2]. You can also call your local police to get a police report on file. If a scammer is abusing your current credit accounts, consider putting a credit freeze on them.


Disclaimer: The information contained herein is provided for free and is to be used for educational and informational purposes only. We are not a credit repair organization as defined under federal or state law and we do not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit. Articles provided in connection with this blog are general in nature, provided for informational purposes only, and are not a substitute for individualized professional advice. We make no representation that we will improve or attempt to improve your credit record, history, or rating through the use of the resources provided through FreshStart Blog or CreditFresh website. 


[1] https://reportfraud.ftc.gov/#/

[2] https://www.ic3.gov/Home/ComplaintChoice/default.aspx

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