Unscrupulous con artists are always looking for new ways to exploit trusting people, whether it’s via phishing efforts or romantic or post-disaster schemes. In the face of a pandemic, internet users have had to be wary of illegal at-home testing kits and other inventive ways to trick you out of money.
The Federal Trade Commission (FTC) received a staggering 2.2 million fraud reports in 2020 alone, totaling $3.3 billion in damages. The FTC continues to see a spike in fraudulent conduct this year, including a significant increase in scams started on social media.
Scammers will be less likely to take advantage of you if you are aware of the most common loan scams and how they work so that you can protect yourself from them.
Do not be “locked out” of your home by a fraudulent bankruptcy operator
Are you struggling to make the mortgage payments on your home? Are you at risk of foreclosure on your home? Find out all the details before you hire someone to solve your mortgage issues.
“Bankruptcy foreclosure scams” or “mortgage rescue scams” target those whose mortgages are in danger. Scammers advertise on the Internet and in local newspapers as well as distribute flyers or call people whose homes are included in foreclosure notices. Sometimes, they make their appeals to certain ethnic or religious groups.
They may also promise to solve the problems you have with your mortgage company or to help you obtain refinancing. They may also request you to make your mortgage payment directly to the scammer. They might even require you to surrender your property title to the scammer before making payments to the company to remain at home. Try visit bankruptcyhq.com now for more information.
However, instead of contact with your bank or refinancing your loan the fraudster takes all the money you paid and later files bankruptcy cases on your behalf and sometimes with no knowing.
A bankruptcy filing can stop the foreclosure process however, it is only temporary. If bankruptcy is filed under your name, however you do not participate in the proceeding the judge will decide to decide to dismiss the case and foreclosure proceedings will go on.
If it happens, you’ll be liable for the amount you paid to the fraudster — and you may end up losing your property. Additionally, you’ll be listed as a bankruptcy on your credit report for a number of years following.
Loan Scams: The 6 Most Common Types
Scams involving loans are those in which a company pretending to be a lender successfully obtains your personal information but fails to supply you with the loan you asked for. Here are six of the most common loan scams and the tactics that con artists use to prey on unsuspecting victims:
- Loans with upfront fees
- Phenomena of phishing
- Government imposter con games
- Scams using fake checks
- Planned repayment of debt
- frauds involving charitable donations
1. Loans that charge a premium in advance
A low-interest loan is offered in exchange for up-front fees in an advance-fee loan scam. The terms “application fee,” “origination charge,” or “processing fee” may be used to describe these payments. After sparking your interest, they’ll then ask you to pay those costs using a non-traditional payment method, such as an Apple gift card or prepaid debit card.
In this case, the scammer may offer to increase the fee to your loan balance in exchange for a fraudulent electronic transfer to your bank account. Using this deceptive strategy, lenders may promise to include the price in the total cost of the loan if you can’t pay it back in full.
Several warning indicators point to an advance fee loan scam:
- Never give out your credit card or bank account information to anybody who offers you a quick loan for an upfront fee through advertising, email, or cold call. A suitable lender will only ask you to pay a fee after accepting your loan application.
- Most reputable lenders will not approve a personal loan application without reviewing the borrower’s credit history and credit score. Fraudsters prey on people and businesses with bad credit or debt by offering loans that are impossible to get from legitimate lenders. They should seek a copy of your credit record to verify that they are dealing with a fundamental banking institution.
- Con artists that claim to have connections or resources that genuine lenders do not typically make false promises. You should be skeptical of loans with cheap interest rates or high credit limits if you have adverse credit. Any offer that seems too good to be true probably is.
- Even though you have not yet received an official offer, fraudsters may attempt to compel you to make a decision as soon as possible. You should never sign a loan agreement before adequately researching the terms and conditions of the loan.
2. A phishing attack
Email phishing is used by criminals to acquire your usernames, passwords, and bank information, among other details. To access people’s personal information, phishers use a method known as “social engineering.” When you are tricked into opening an email attachment, malicious software might be installed on your computer.
Fake emails may seem authentic because they are carefully constructed. People who want your attention often use frightening language, such as threatening that your accounts will be locked if you do not respond. It’s only after the scammer has gotten their hands on your data that you realize you’ve been duped.
Fraudsters are on the prowl, and there are several red flags:
- Never open an attachment in an email from an unknown sender, even if it seems to be authentic or comes from a well-known acquaintance. Phishers may fool even the most sophisticated victims by appearing to be banks, credit card companies, and social networks. In the battle against malware, you shouldn’t rely just on your computer’s security software to keep you safe.
- Due to today’s rapid-fire communication systems, a legitimate lender’s email may include a typo or a misplaced comma. To guarantee that emails are error-free before they are sent out, most firms have procedures in place. There are grammatical faults and generalizations in the tone of these communications.
- An email from a company or someone you know is more likely to be opened and trusted than an email from an unknown source. Phishing scammers are aware of this fact. They achieve this by modifying the domain name of the sender’s email address. Even if the valid email address is robert.smith@paypal.com, a phishing email may seem to be from that address. This one seems like a real one because of the hyphen as far as hoaxes go. The recipient’s genuine email address may be found by hovering the mouse over a link. If it seems weird or displays a different destination than the domain, you should report it or delete it from your website.
3. Imposter games by the government
By phone or email, people impersonating to represent the federal or state government are expected. If they want to avoid serious repercussions, they’ll ask you for personal information or money from the front. Falsified COVID cures and accelerated stimulus payments were among the many government scams perpetrated during the pandemic.
Signs of a phony government official:
- If the IRS sends you a message concerning your finances by email, text, or social media, just ignore it. The “.gov” suffix will always be included in government-issued email addresses. Try typing the email address into a web browser if you’re still uncertain. They are more likely to appear in search results from legitimate government email addresses than from spam.
- Furthermore, law enforcement authorities would never call you and ask for personal information or cash to avoid arrest, penalties, or deportation. Police enforcement scammers may even provide badge numbers or the names of actual law enforcement personnel to frighten you into participating. Hang up if you feel compelled to do so.
4. Scams involving counterfeit checks
To get your money back, scammers ask you to put money into your account and then wire it back to them in a cashier’s check, money order, or another kind of check. Consequently, if you accept the check they offer you, your money will be gone before you realize it.
Red flags and variants of the fake check scam:
- It is common for scammers to send you a fake cheque to deposit, hoping you would accept their employment offer. A wire transfer or gift card may be used to repay or send money under the guise of your job’s responsibilities. When a check bounces, the bank will deduct any fees they incur due to the failed bill.
- You’ll get an email claiming to be from an international lottery, and the scammer will ask you to send money immediately to cover taxes or fees.
- The fraudster will pretend to be interested in buying whatever you’re offering online and overpay for it. This item will be mailed to you along with a cheque for more than the purchase price. It’s possible to lose money and the thing you’re attempting to sell.
5. There has been an increase in debt settlement frauds in recent years.
Debt settlement groups often make promises of “pennies on the dollar” (or debt relief). They work with your creditors to get them to change their terms of agreement with you.
There are legitimate debt settlement companies, but there are also fraudulent ones. If your credit is good enough, you may be able to get a lower-interest personal loan to consolidate your debts, which is a better alternative.
Red flags for debt settlement loan scams include:
- A “registration” or “processing” fee may be requested upfront by shady debt settlement companies, similar to advance fee scams. This is not only ethically reprehensible, but it is also illegal. Don’t pay a debt settlement business if they want money upfront.
- You don’t have a promise from your creditors that they’ll reduce or cancel your debts. It’s hard to promise that you’ll get out of debt with any company.
- Beware of companies who advise their customers to stop paying their creditors or otherwise interacting with them. This will do nothing except further damage to your credit rating.
6. Donation or Charitable Fraud
A particularly heinous scam involves con artists posing as representatives of philanthropic groups amid trying times. Unlike phishing and advance-fee loan scams, fraudsters often appear to be respected charity organizations to take money from naive contributors. It’s more complicated than ever to identify what’s real and what isn’t because of crowdsourcing and new genuine NGOs. Make sure you’ve done your research before handing out any cash.
Six Steps to Detecting a Loan Scam
There are additional ways to quickly spot a loan fraud, besides unethical lenders that want an upfront deposit.
1. It seems that the lender does not give any documentation.
Signed and dated loan agreements are required. You know it’s a scam when a loan scammer calls and offers you a deal.
2. The borrower and the lender won’t have a physical address.
If a lender refuses to provide a physical address, it should serve as a red flag. However, if you have any doubts regarding the lender’s location, you may utilize Google Maps to check. Loan scammers often operate P.O. boxes as a front for their scams. a PO Box, a fictitious address, or even an empty lot is used to provide the impression of legitimacy.
3. The lender’s website seems suspect (or none at all).
A reputable financial institution’s website will contain information about the company, the types of loans, and how customers may verify the interest rates on those loans. Dealing with companies without a website or one that is not secure is a recipe for disaster (the URL should begin with a padlock symbol).
4. The lender doesn’t care about your credit history.
Lenders who are serious about their business will request some basic information from borrowers before deciding. The lack of interest in your previous credit issues is a major red flag. Loans for people with adverse credit may be obtained, but they will still want details about your job and earnings.
5. The terms of the loan are yet unclear.
Loan costs and conditions should always be cleared upfront by reputable lenders who never ask for payment before the loan has been approved. Scammers’ loan applications are more likely to include ambiguous or fake information.
6. Your state does not recognize the lender.
Licenses are required for all lenders in the states where they do business. Make sure that the lender is genuine by contacting your state’s attorney general’s office if this information is not accessible on its website.
Signs of a Trustworthy Personal Loan Company
Several methods tell whether you’re working with a reputable organization or a loan scam.
1. They have a solid online presence.
Customer evaluations and news reports may be used to determine the reputation of an institution’s financial services. If a customer is dissatisfied, the best action is to move on.
2. The lender’s loan makes financial sense.
If you have a good credit history, a steady income, and steady employment, you may be able to get a loan from a reputable lending agency. It’s because of this that lenders will not provide you with a loan from a reputable source if you can’t pay it back. Your finances should enable you to borrow money, so long as it makes financial sense. The consequences of taking out a big loan and not repaying it, even from a respectable lender, might be considerable.
3. This lender has an A+ rating from the BBB.
To be accredited by the BBB, a company must undergo a thorough and rigorous evaluation. Approved lenders are trustworthy and will go the extra mile for their customers if they have a problem.
4. The lender informs the three major credit bureaus of the new account information.
Your lender may be reporting your payments to the credit bureaus as a good sign, but it’s not required by law. You may be eligible for reduced-rate loans in the future if you pay your payments on time and maintain a good credit score.
Bottom Line
Knowing how to spot common loan scams may help you avoid identity theft, secure your personal information, and protect the money you’ve worked so hard for. If you believe you have been a victim of a scam, you should immediately contact your local police department and the state attorney general’s office. The Federal Trade Commission should also be notified.
To prevent losing money or property to scams and fraud, one must be able to tell the difference between legal lenders and criminals. LendingClub Bank’s loan application is simple. After reviewing your application and verifying your credit history, we’ll contact you with an offer. Before we begin working with you, we will never ask for any fees or money. Most of our members have been approved for a loan within 24 hours and had their money in their hands within two business days*.
Scammers’ Frequently Asked Questions regarding Loans
In what ways does fraud work?
Loan scammers sometimes utilize social engineering to coerce their victims into handing over money and other valuables. In general, they target those who have previously been denied loans or who live in poverty-stricken regions. When dealing with a loan shark, don’t give out any personal information over the phone.
Is a loan legitimate?” “How can you know whether a loan is legitimate?”
If all else fails, contact the Better Business Bureau or the Attorney General’s office in your state to verify the legitimacy of a loan.
I may have been scammed by a loan company.
If you’re a victim of a loan scam, call the police, file a report with the FTC, and file a complaint with the CFPB. Another option is to contact the FBI’s Internet Crime Complaint Center. You must take the time to jot down as many facts as possible before getting any organization.
