A personal loan can also be known as an advanced fee loan. Not all advance fee loans are scams. In this article, I will help you identify how to spot personal loan scams and how to be aware of them.
Credit statistics as reported by Credit Donkey stat
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 the lower credit scores.
Is this the answer?
When someone is having financial hardships, they may be more likely to fall for one of these scams. A personal loan to get them through the next payday or help buy a car sounds like an answer to a prayer.
In reality, a personal loan scam 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 promise to you on the phone you will receive a loan if you pay money upfront.
What are personal loan scams?
In this day and age, the paycheck doesn’t go far enough. You may live from paycheck to paycheck. You have kids at home that need food on the table.
You make enough money to keep the family going, but your car breaks down. To fix it will cost more than the car is worth. You need a new car. You receive an advertisement in the mail that says you are guaranteed a loan without any questions asked. Bad credit doesn’t matter to this company. The offer comes at the perfect time.
You call the company, and they tell you that you are eligible for a 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. You just got paid and can take this money out of the $10,000, so you wire them $150.
They are going to send you papers for the loan by email to sign and get back to them as soon as they receive the money. But after you wire the money, you never get the documents or the loan.
7 Red flag signs of a scam
1. Offer by phone
When a company calls and offers you a loan on the phone, it is a red flag. As I mentioned above, this is illegal in the US and Canada.
2. An offer of a low-interest rate
You know your credit score is low and the car dealership has said your interest rate will be very high. Your phone offer states you will receive a low-interest rate. Clearly a red flag.
3. Requesting money upfront
If a company requests for upfront money, it is a scam. A reputable and honest company will take the fees out of the loan amount. You will not be 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. The sign of no credit check 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.
6. A promise of unsecured email contracts
A reputable company will require documents to be 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.
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 for these seven 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 make your financial situation worse.
If you would like information on how to make money with affiliate marketing, please click on the link below. When you click on the link, it will open a post that talks about a respected, time-tested platform to earn income to help you out of debt. It is a free offer — no risk, No obligation only information for you to make an informed choice.
I am happy to answer any questions you have. If you have an experience you would like to share, please feel free to leave a comment. Your comment will help all of us to avoid these scammers.