This post first appeared on finder.com
Not sure what’s a scam or not? Here’s how to protect yourself online.
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 legit 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.
7 signs of a personal loan scam
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, be wary. A scammer typically doesn’t care about your creditworthiness because it’s after your personal information.
The lender isn’t registered in your state. States require lenders to register for a license. If you find a business isn’t licensed to operate in your state — even if it’s licensed in other states — don’t respond to its lending inquiries. You might have stumbled on a fraudulent website using a business’s name to make money.
Your loan offer is incomplete. The Truth in Lending Act requires all lenders to provide the complete terms of a loan, including the final cost of the principal plus interest, before you sign on the dotted line. If your offer lacks details, contains spelling or grammar errors or otherwise raises an eyebrow, it could be a scam.
You can’t find a physical address. If a lender doesn’t provide a physical address or contact information, put the brakes on your loan. Scammers make it difficult to get in touch later, thus avoiding any legal action you might want to pursue against them.
Your offer is 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.
The loan requires payment up front. Loans demanding “processing,” “insurance” or even “origination” 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.
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 lure you in with guaranteed approval so they can collect fraudulent upfront fees.
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.
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 Social Security 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.
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.
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.