Have you ever received a call with an offer to borrow money that just sounds too good to be true? But you are hurting for cash, so you check it out. You could be the victim of a personal loan scam, also known as an advanced fee loan. Not all advance-fee loans are personal loan scams, but if they are asking you for money, that is a red flag. In this article, I will help you identify how to spot personal loan scams and how to be aware of them.
Statistics On Personal Loan Scams
According to FICO’s data, which is a score ranging from 300-850, 11.7% of the population has a score of 549 or less. A score of 550 or less is considered weak.
An alternative score known as a VantageScore developed by the three major credit bureaus, which also has scores ranging from 300 to 850, has reported an average rating of 673. A score of 673 is considered fair.
I gave these statistics to help you see that the people who do the personal loan scams target those people with lower credit scores.
Credit statistics as reported by Credit Donkey stat
Is This The Answer?
When someone has financial hardships, they may be more likely to fall for one of these personal loan scams. You may need just a bit of money to get you through the next payday or help buy a car, in this case, the calls you get may sound like an answer to a prayer.
No matter how sad it is, these people are out to get your money and not to help you. A personal loan such as this will harm your credit score in the long run, and you may end up in a debt counseling program.
In the United States and Canada, it is illegal for a company to make a promise by phone stating that if you pay money upfront, you will receive a loan. The law is in effect to protect you from scams like this one.
What Do Personal Loan Scams Look Like?
In this day and age, your money doesn’t go far enough. Do you live from paycheck to paycheck and don’t have enough cash to put food on the table. Not to mention, you worry about your kiddos and how you will care for them.
There is just enough money to keep the family going, but your car breaks down. To fix it will cost more than the car is worth, which means you need a new car. Someone sends an advertisement in the mail that says you are guaranteed a loan without any questions asked. Bad credit doesn’t matter to this company and the offer comes at the perfect time.
You call the company, and they say you are eligible for a personal loan of $10,000.00. You know this will go a long way toward a used car. The company suggests you wire them $150 to cover the cost of financing. In light of your needs and the offer you scrape up the $150 and wait for further instructions.
They say for you to send them the money and they will send you documents to sign. After you wire the money, you wait for the documents, consequently they never show up. You start to get a bit worried. What happened to these people?
A personal loan scam just took you by surprise, but the sad part is the law cannot trace a wire, so the money you sent is gone, and no way to get it back. On the whole, you are further behind and more desperate.
8 Red Flag Signs Of Personal Loan Scams
1. Phone Offer For Personal Loan Scams
When a company calls and offers you a loan on the phone, it’s a red flag. As I mentioned above, this is illegal in the US and Canada.
2. An Offer Of A Low-Interest Rate
Scammers target those who are in financial trouble. When a credit score is low, the interest rate will be high, with this in mind, if the caller is offering you a low interest rate, it is clearly a red flag.
3. Requesting Money Upfront In Personal Loan Scams
If a company requests upfront money, it is a scam. A reputable and honest company will take the fees out of the loan amount, therefore you will are not required to pay cash out of pocket.
4. Promise A Loan Without A Credit Check
Reputable lenders require a credit check before lending you money. If they offer you a loan without a credit check, it is a red flag.
5. Pressure Sale
The company expects you to make a decision immediately. You request time to research the company online, and the company tells you the loan offer will not be available after you hang up the phone—just another clear red flag.
6. A Promise Of Unsecured Email Contracts
A reputable company will require documents sent by secure data transmission. A pledge of unsecured data is a red flag.
7. Name Very Similar To A Larger Company
The company name sounds familiar but closely imitates a larger company.
8. Wire Transfer
The caller requires you to send them a wire transfer to cover the cost of handling. A wire transfer is not traceable, which is another red flag. A reputable company will not request money.
Remember the saying, “if it is too good to be true, then it is.” Follow your instincts and watch out for the scammer who will take your money and run. A personal loan scam is just one type of fraud. Please observe these eight signs. If you see only one sign, it is a red flag. It is hard when there is not enough money, but falling for a scam like this will worsen your financial situation.
Times are hard, especially now with so many out of work or filing for unemployment. Loan scams are on the rise and can wear many different faces. One such front is the amazon scam. One thing to remember is: if they call on the phone and will not send you a letter, then it is a scam.
Have you had an experience with a phone scam or loan scam? We would love to hear your story. Please leave comments and questions in the comment section below.