Fraudsters have been around for as long as the internet has. Loan scammers, specifically, have had a fruitful season ever since the spur of COVID-19. According to the Federal Trade Commission, there were almost 2.2 million fraud reports over 2019. To add fuel to the fire, identity theft was prevalent and the primary money source for scammers.
Taking this into account, it’s no wonder online loan scams have been such a major success. These make-believe lenders prey on and attack innocent people when they’re at their most vulnerable. Unfortunately, without the involvement of local law enforcement, it rarely ends well.
To protect yourself from such scammers and still receive a personal loan, you can always take some preventative measures. Scroll down and learn how to check if a loan company is legit.
What Are Online Loans and Are They Legitimate?
You’ve probably taken out a payday loan or other type of cash advance before. While this is usually done in person, online payday loans are becoming increasingly popular. If you want to apply for a loan via the internet, you can do that from the comfort of your home or anywhere with an internet connection. You don’t have to set foot in a lender’s office!
Furthermore, internet loans offer fantastic deals on fees and don’t make a fuss about loan qualifications. These lenders have lower interest rates and less stringent requirements than your traditional lender.
Online loans are entirely legitimate, and lenders who practice online lending must possess a certified license. However, the internet is a giant place, and sometimes scammers find their way in. But don’t be concerned! We’ll explain in detail how to protect yourself from applying with an unauthorized lending company.
How Do You Know if a Personal Loan Company Is Legitimate?
So, you’re trying to take a legitimate loan online. There are extra steps you can take to protect yourself from unfavorable lenders. To check if a loan company is legitimate, you can research it in and out and look into its past activity. Any info on its licensing jurisdiction can also be of major help. We’ll now go over all of this in detail.
Look Up and Research the Lender Online
It would be best if you always did in-depth research of the lender you plan on applying with. So if there’s any dirty laundry you’d want to know about, you’ll most positively find it on Google.
Is the Lender’s Site Secure?
How reliable is the loan company’s site? Legitimate loan companies have a well-built website with a user-friendly interface and valid SSL protection. Most of them also list the legal bodies that license them at the bottom of the page. It’s also a huge plus if they have genuine customer reviews on their front page!
Search and Read Reviews of the Loan Company
There’s no better way to check if a loan company is legitimate than by reading other people’s experiences with it. If you doubt a lending company’s trustworthiness, note what its previous clients have said about it. That’ll give you a thorough and genuine insight into the business’s practices. Thoroughly read any online reviews left by actual customers, if possible.
Check the Lender’s Rating With Better Business Bureau
The Better Business Bureau is a non-profit business working towards a safer online marketplace environment. Their job is to look into the legitimacy of a company and uncover any personal loan scams.
It’s true, the Better Business Bureau cannot compel a firm to cease its practice. However, they can provide consumers with vital information about the company and help them settle disputes through arbitration.
Verify the Contact Details Provided
To assess the legitimacy of a lending body, the first thing you should do is proof check its contact details. By contact details, we mean their phone number and email. It would greatly help if you talked with an employee over the phone about your concerns.
Furthermore, pay attention to any robot-like behavior from customer service support. Many websites today use bots to communicate with clients. If this is happening in your case and there’s no way to reach an actual person, we suggest you part ways with the lender.
Verify the Loan Company Is Registered in Your State and Where It’s Located
While loan companies mainly operate online, they are always headquartered somewhere. So if you’re afraid you might be in trouble, find the firm’s geolocation. The easiest way to go about this is on Google Maps. Just make sure what you’re seeing is a real location and not just an empty piece of land.
Better yet, check its validity by looking up its registration online. You can ensure the lender is registered with the appropriate state government authorities by contacting your state attorney general.
How Do You Know if You Are Being Scammed for a Loan?
Sometimes you think you’ve done your homework and found out everything there is to know about a loan company. Consequently, an ugly truth may lie underneath, and you may get scammed! Keep an eye on the following warning signs to prevent yourself from getting caught up in a loan scam.
A Loan Lender Contacts You First
It is not often that a lending firm gets in touch with you first. However, suppose you believe otherwise or have been contacted by one; let’s see an example of why that’s a red flag.
A legitimate loan company won’t contact you for business opportunities. The Federal Trade Commission states that lending companies aren’t allowed to contact potential clients over the phone or face-to-face. Instead, you should look to do business with firms that advertise themselves across different socials.
The Lender Doesn’t Have a Physical Address
So, you’ve put into practice the steps we recommended above and looked up the firm on Google Maps. But to no avail, you discover that they aren’t located anywhere.
You can now continue to check their other social media accounts and look for an address. If you don’t find one there either, you may be dealing with a possible personal loan scam. A lender may provide you with a false address or no address at all to avoid future legal consequences for misconduct.
The Loan Company Is Not Registered in Your State
While smaller businesses may be allowed to not register with the state, loan brokers specifically aren’t. That’s what the Federal Trade Commission requires. That way, you know they’re abiding by rules and regulations you’re already familiar with. Plus, if you’re unacquainted with any state regulations, you can always contact your state attorney and get the answers you seek.
You Are Pressured to Act Immediately
If the lender is applying high pressure on you to make a deal or issue any upfront payment, you may be in trouble. Legitimate loan companies will always let you take as much time as you need before doing business with them. So, when looking into loan offers, avoid those that give you a sense of urgency. An excellent example of this is the application having a short expiration date.
The Loan Terms and Fees Are Not Transparent
This one is probably the biggest red flag of all. Say you’re getting in touch with a loan firm. You think all is well except that you can’t find any info on the interest rate or extra fees. Before sharing any personal information with such a lender, think about why they are hiding something so crucial.
A legitimate business won’t have a loan offer with hidden fees or ask you to pay upfront. If you’re dealing with a lender that’s requiring you to pay for something they’re only mentioning now, it’s definitely a scam.
Our lending partners that provide instant cash to DirectLoanTransfer customers, for example, always give all the necessary details. These include fees, penalties, and all other terms associated with the loan offer.
The Lender Wants a Prepaid Card
A prepaid card or a gift card has no business with online loans. By that logic, your lender demanding that you provide them with a prepaid card or gift card is the ultimate warning sign. They don’t need this card for anything—except for scamming you.
The main reason scammers may ask for this type of information is to get more money out of you. They could potentially ask you to cover any extra fees with that money; however, that’s a scam because legitimate lenders deduct that money directly from your loan amount.
The Loan Company Is Not Interested in Your Credit History
If you’ve taken out personal loans before, think back to the application process. The company most likely asked for your credit score and even checked in with major credit bureaus. That’s because a legitimate loan firm will typically be interested in your credit score. Some may even do a hard credit check to assess your standings. If you happen to have poor credit, they’ll further ask you to provide them with income details, past payments history, and so on.
Of course, some services, like DirectLoanTransfer, provide no credit checks and offer bad credit loans. This is a specific situation, and lenders will perform other checks to ensure that you can repay the loan. Moreover, they will not have other red flags like hidden fees, requesting too many personal details upfront, etc.
The Lender Is Pushing You To Cease Contact With Your Creditors
Debt consolidation can simplify your debt repayment process and save you money in the long run. If a debt consolidation organization is forceful or encourages you to stop communicating with your creditors, it’s most likely a fraud. It’s a clear sign of a debt collection scam.
The Lender Is Operating a Fake Website
Fake loan lenders have gotten extra creative with their scamming tactics. We’re talking to the point where you can’t tell a genuine lending site from a fake one anymore! These so-called lenders will create a website so convincing that you would never guess it’s a fraud. Always do in-depth research of the lending company’s name rep. A fancy website isn’t proof of legitimacy.
The Lender Asks That You Wire Them Money
Never use wire transfers to send cash to a lender. Trust us. You’ll run straight into a scam. If a lender is pushing you to send them money for interest rates or fees, they’re trying to rip you off. All the fees and charges are repaid alongside the borrowed amount, never upfront.
You’re Asked To Provide Personal Info Upfront
One of the main warning signs you are dealing with a scammer is when they ask you for personal info upfront. Never give out your bank account information or Social Security Number to a service before you’ve established their reputation. These scammers may be only interested in your personal details, so they can later sell them or use them for identity theft.
The Loan Company Offers Private Student Loan Forgiveness Program
For federal student debts, the US Federal Government offers a loan forgiveness program. If a lending service approaches you offering to erase your student loans, it’s most certainly a student loan fraud. Only the federal government can provide such programs.
What To Do if You Are Getting Scammed by a Loan Company?
So, you suspect you might be part of a chain of loan scams. Don’t worry. There are steps you can take to protect yourself and make the authorities aware of such misconduct.
- Stay informed. Knowledge is ultimately grounded on research and the uncovering of information. To better assess a loan firm’s legitimacy, look into its complete history. You can even talk to people you know that have dealt with a similar problem and seek advice.
- Contact the authorities. Give state officials a call to make them aware of the scam. Even better, provide them with any documentation of the loan application to further facilitate your claims. You can also report fraud online.
- Make contact with oversight organizations. By oversight organizations, we mean the FBI, the Better Business Bureau, the Federal Trade Commission, etc. They’ll help you navigate the situation from that point on.
- Forbid any credit bureaus from issuing new credit on your behalf. If the fake lender has stolen any of your personal information, like your Social Security Number, they may try to take out credit in your name. To prevent this from happening, contact Equifax, Experian, and TransUnion. That will alert all three legal bodies that you may be a victim of a scam. That way, they’ll let you know if anyone tries to make a transaction in your name.
People may turn to illegitimate lenders if they feel their reputation is on the line due to their past credit, but there’s no reason to worry about that. Some legitimate lenders may opt for other financial info and approve no credit check loans.
If you must take a loan, there are lenders out there with all kinds of different services and requirements. Don’t risk your finances by getting involved in potential scams. Instead, research their background and look into customer reviews when you come across a potential lending service. This can spare you a ton of money and unnecessary legal work.
The best solution is to use DirectLoanTranfer’s service to get instantly matched with legitimate payday lenders in your area!