Online Loans Scam Alert: Beware of These 6 Common Types


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Online loans have become quite popular over the past couple of years. That’s because they are convenient, easy to use and highly accessible. They are a great way to pay for a new car, home, or anything else you need — things that you may not be able to afford otherwise.  It sounds simple, but there are a lot of scams out there. 

The purpose of scammers is to steal personal information and ask for a loan transfer from your bank account. Scammers will take your data to transfer money from your bank account for a loan.

These fraudsters use different identities, usually imitating real persons, and change the name of the place or nation where their company is based so clients don’t discover that it’s not who they think it is.

Scammers may even modify the name of their website and email address to look real at first, but the scammer will subsequently change their identity, even more, leaving everyone puzzled about who they are contacting.

This article will tell us more about the different types of online loan scams and how to avoid them.

6 Common types of online loan scams

Here are some of the most common types of online loan scams.


Phishing is an email fraud that con artists use to get your account, password, and financial information. You will be tricked into disclosing your personal information by phishers using “social engineering,” a technique for taking advantage of individuals by manipulating their emotions.

Sometimes, this entails deceiving you into opening an email attachment that infects your machine with malware.

Scammers frequently design their emails to appear as though they came from a reliable source. They frequently use threatening language to catch your attention, such as a warning to freeze your accounts if you don’t answer right away. Before you even know what has happened, the fraudster can simply take your money or your identity once they have access to your data.

Government impostor scams

Government impostors frequently contact you by phone or email and claim to be from a state government entity. They’ll strongly insist that you provide them with your personal information or money right away, or else.

Government scam artists increased during the height of the pandemic and now included offers for vaccinations, phoney COVID treatments, and expedited stimulus payments.

Debt settlement scams

Companies that specialise in debt settlement (or debt relief) make claims that they can negotiate with your creditors to have your debts eliminated or lowered to “pennies on the dollar.”

Even though some debt settlement businesses are honest, scammers will quickly take your money and break their promises. Better options include debt management programmes and, if your credit is good, consolidating your debt with a lower-interest personal loan.

Donation or charity scams

One of the most regrettable sorts of fraud is committed by opportunistic con artists who pose as charities during trying times. Scammers may frequently pose as genuine organisations in advance-fee loans and donation frauds, which have a lot in common.

And it can be trickier than ever to distinguish between what is legitimate and what isn’t today with the proliferation of crowdsourcing and newly founded respectable nonprofits. Spend some time researching any individual or group requesting financial support.

Fake check scams

A person or company calls you and requests that you deposit a check, cashier’s check, or money order into your account and then wire the money back to them so that they may pay you. This is known as a fake check scam.

If you consent, the check they send you will eventually bounce, and by the time you discover the deception, the con artist will have already made off with your money.

Some con artists will give you a fake check to deposit while claiming to offer you a job. They will instruct you to return or send some of the money in a certain form, such as a wire transfer or gift card, under the pretence that doing so is part of your job duties. You will lose the money you sent along with any bank costs incurred as a result of the bad check when the check eventually bounces.

Advance-free loan scams

In an advance-fee loan scam, the scammer will contact you and offer you a low-interest loan in exchange for upfront fees. After catching your attention with terms like “application fee,” “origination fee,” or “processing cost,” the scam artist will ask you to pay those fees using a specific non-traditional payment method, like a prepaid debit card.

The scam artist will offer to add the upfront payment to your loan balance if you decline to make one, and will then make a fictitious electronic transfer to your bank for the full amount if you refuse.

Since reputable lenders occasionally offer to wrap your charge into the loan cost if you can’t pay them upfront, this is a particularly sneaky technique.

8 ways to spot personal loan scams

You can learn how to detect fraud and determine whether a loan provider is legitimate. Here are some typical warning indicators of loan fraud.

The lender ensures approval

Trustworthy lenders are upfront about the fact that they’ll need to check your credit, occasionally ordering reports from each of the three major credit agencies (Equifax, TransUnion and Experian).

To ensure that you would be diligent about repaying a loan, most lenders need to know whether you have a history of making on-time and completing payments on your obligations. Your creditworthiness is irrelevant to fraudulent businesses. They frequently look for high-risk borrowers who are more likely to miss loan payments and pay excessive late fees and penalties.

Bad credit loans are available from certain reputable providers. When establishing your eligibility, these lenders take into account factors other than your credit score. Before providing you with a loan, these lenders will nevertheless frequently enquire about your income, employment history, and educational background.

If you urgently need a loan, you can try taking out an online payday loan. With a payday loan, a lender will issue high-interest credit based on your income for a brief period of time.

The lender requests an upfront prepaid card payment or other payment

Some scammers have been known to ask borrowers for prepaid debit cards, gift cards, or financial information. Typically, the con artists say they require the information for fees, insurance, or collateral. This is fraud. Financial companies that are legitimately in business may charge you for your application, appraisal, or credit report, but these costs are subtracted from your loan.

Prepaid cards are a major caution sign. If you give it to a lender, you won’t be able to report it as stolen because it is practically as untraceable as cash. You can make a complaint with your bank or credit union if you provide your login information, but it can take some time for your claim to be looked into. Additionally, you might not be able to get back the money that was stolen from you.

The lender isn’t registered in the state,

Generally speaking, lenders must be registered in the states in which they conduct business. You can check with your state’s attorney general’s office to see if the lender is legitimate if this information isn’t readily available on the lender’s website.

The website of the lender is not secure

Lender websites can be hard to know since fraudulent organisations will try to fool you by using names and logos that are similar to those of legitimate businesses and creating professional-looking websites. A fraudulent website could utilise the personal financial information you enter to take your money.

The lender’s fees are not clearly stated

Scammers won’t reveal their costs when questioned or promote them publicly on their websites. Additionally, they might inform you that your loan application has been accepted before asking you to pay a charge upfront. Fees should be revealed during the application process and before you sign anything, even though some reputable lenders do not display them on their websites.

A warning sign is when additional fees are added after loan approval. Avoid any business that engages in this activity, especially if you are informed that the upfront payment is required for things like “processing,” “insurance,” or “paperwork.”

The lender compels you into taking immediate action

Scammers might pressure you into going for “urgent” offers that are only valid for a short period of time. They may also request to begin the loan application process before you have thoroughly discussed the conditions and charges of the loan.

Typically, personal loans from financial organisations come with uniform rates and conditions. Even while lenders might run limited-time specials, such as waiving particular fees, these offers are often made to all applicants for a set period of time rather than just a few hours so that potential borrowers have time to compare different options.

The lender doesn’t have a physical address

You should be able to visit the physical location of any lender you are considering. For safety’s sake, run it through Google Maps. It’s crucial to double-check this because some companies performing personal loan scams may offer addresses that are really empty lots.

If there is no indication of a physical address, stay away from the lender. To escape legal repercussions, many fraudulent businesses are untraceable.

It appears to be too good to be true

In fact, if a loan offer seems too good to be true, it probably is. Genuine lenders won’t randomly phone you and make you an alluring loan offer. Without filling out an application and allowing a hard credit check, you are unlikely to get approved for a loan with an absurdly low rate.

How to avoid loan scams

Here are the best ways to avoid loan scams.

  1. Research the lender 

The first thing to do is to make sure a company is legitimate before considering taking out a loan from it. Verify that the interest rate stated in your offer corresponds to the rate stated on the lender’s website. You might need to fill out some information to determine the rate you are prequalified to get,

Look over the offer’s fees as well. It’s crucial that the fees you offer match those posted on the business website since while some lenders don’t charge any fees, others do with origination fees, late fees, or prepayment penalties.

  1. Don’t pay money upfront

Offering you a loan with the caveat that you provide them money ahead is a traditional technique that many con artists employ. They might guarantee you money after they get that first payment. Some lenders may charge administrative or origination costs when you accept a loan. However, they are normally deducted from the loan proceeds and will only have an impact on the total amount of money you will get.

  1. Question lenders that guarantee loan approval

Almost all lenders will conduct some form of screening process before they can make you an offer for a loan. Although each lender has a different minimum credit score requirement, most lenders use your credit score when determining whether to approve you for a loan. Many businesses will run a mild credit enquiry to provide you with tailored prices.

Be cautious if a lender requests very little information and guarantees approval regardless of your creditworthiness or other financial factors. A legitimate lender may need information such as your name, reason for taking out a loan, contact information, and date of birth.

  1. Be mindful of how the lender is reaching out to you

Legitimate lenders do employ a range of techniques to persuade you to borrow money from them. A lender may send you an email or an internet advertisement, but not all businesses employ these strategies. Therefore, if you receive an email from a lender offering you a loan, it’s conceivable that a fraudster is contacting you under a legitimate firm name.

The Bottom Line

When choosing from the various types of loans, compare several lenders to be sure you’re getting a good deal from a reputable loan company. Numerous loan lenders give loans to customers in need regardless of credit status, so it doesn’t matter if you don’t have great credit. Don’t let a con trick you into falling for it. Find a business that will cooperate with you where you are instead.