Loan FAQs

How to Spot Personal Loan Scams

Uncover common tactics used by fraudsters in personal loan scams. Learn how to spot and arm yourself with the tools to report. Stay ahead of fraudulent lenders.
Man using laptop at home wonders if he's fallen victim to a personal loan scam.

From the earliest civilizations, personal loans have provided people the money the need to make ends meet, start a business, and cover unexpected expenses. In Roman times a personal loan might involve a pile of seeds, but today’s personal lenders provide money in exchange for repayment with interest.

Personal loans can serve a critical role in stressful times, but far too often these offers masquerade as legitimate but ultimately function as Scams. Rather than helping people in dire situations, loan sharks prey on the vulnerable and swindle them out of money through tricky methods. To help you spot the underbelly of personal loan scams, we created a list of ways you can spot bad actors and stay clear.

5 Ways to Spot Personal Loan Scams

While some loans, such as title loans, will let you have money with no credit check, they don’t really qualify as a personal, unsecured loan, because they are secured by the title to your car. But unsecured personal loans will require a credit check. The warning signs of personal loan scams and what you can do if you’ve been scammed include the following.

The Federal Trade Commission doesn’t recognize the lender

Legitimate personal loan lenders will maintain registration in the states where they provide loans, per Federal Trade Commission requirements. This allows regulators to keep an eye on their conduct and receive reports of any illegal activity from consumers. If you visit the lender’s website and do not see a list of states where it provides loans, consider this your first red flag.

If you cannot find the information, you can contact the department of banking, the attorney general, or the department of regulation in your state to find out if the lender maintains proper registration. When you can’t find any information on the lender being registered in your state, walk away.

No credit check required

Providing a loan – no matter how large or small – means the lender exposes themselves to risk. One of the ways to mitigate and lower risks is to only lend to individuals with a sound credit history. When a lender doesn’t run a credit check through a reputable credit bureau (e.g., Experian, Equifax, or TransUnion), this likely means something underhanded is going on.

Lenders who don’t care about your credit history may try to target borrowers considered more high-risk, thereby increasing the odds that they can charge penalties and late fees. Even so, you can still find a reputable lender if your credit isn’t stellar. Still, they will almost always run a credit report.

They contact you

Lenders who seem overly eager to lend you money – without you even asking for it – often don’t have your best interests in mind. Reputable lenders advertise through traditional channels to find their customers. Examples may include online and digital advertising, or social media campaigns.

If you start getting spam calls, emails, or physical mail from a lender you’ve never heard of or didn’t add your name to their contact list, be suspicious. These lenders may have purchased your data from a third party. Rather than actually trying to offer you financial assistance through a difficult time, they might be trying to scam you out of your details – and your money.

You can’t find contact information

Think about it: you wouldn’t fork over your savings or checking accounts to a bank that didn’t have a legal business address on file. So, why would you provide information that offers access to your finances (e.g., your social security number, banking details, etc.) to a company that you can’t prove actually exists?

Legitimate lenders maintain headquarters where consumers can reach company representatives, ask questions, and get information before applying for a loan. If you see a physical address on the lender’s website, do a quick Google Maps search to make sure it looks like a legitimate, active business belonging to a lender. The lender may be an online bank, which is fine, but it should still operate as a business, which include having regular business hours, loan experts you can reach by phone, email, or chat, and a valid license to do business in your state.

Unrealistic deadlines

No legitimate lender will pressure you to sign up for a personal loan before understanding the terms and conditions. You should also be given the time to think it over, fill out your application, and gather the necessary paperwork. However, a scam lender may try to rush you into making a decision before you are ready to do so. If this is the case, you sould walk away fast if they give you an ultimatum or try to get you to agree to an unrealistic deadline.

When those engaged in personal loan scams use pressure tactics, people who really need money can end up making rash decisions. This includes asking for money that they cannot realistically afford to repay. Or, the lender may simply be trying to get your credit information so they can scam you out of money outside the loan request. Regardless, walk away if you feel pressured.

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Frequently Asked Questions About Personal Loan Scams

What do I do if I get scammed by a loan company?

If you’ve been scammed (or suspect you’ve been scammed), collect as much documentation as you can. Additionally, you have any voicemails, emails, loan documents, or any other physical or digital copies of interactions with the lender, make sure you save these in a secure location. You will need these to help prove your case that you were scammed.

Who should I contact if I get caught up in a personal loan scam?

For starters, you should contact your state’s attorney general and/or consumer protection office to file a complaint. Next, you should consider bringing your case to the federal level. You can contact the FBI and the Federal Trade Commission to file a complaint. Lastly, let your local law enforcement know what happened. Even if the lender isn’t based locally, a police report can help limit their ability to scam others in the future.

Will a loan company ask for online banking details?

A lender may ask for bank statements, information about recent expenses and deposits, and even routing information to deposit loan funds after being approved. Still, they should never ask for login information or passwords/pin codes.

Do personal loan lenders call your employer?

One of the ways legitimate lenders minimize their risk and ensure you’re able to repay your personal loan is by confirming employment and salary information with your employer. If this is the case, lenders may ask for HR contact information. At the very minimum, a legitimate lender will require you to show a recent paycheck stub to confirm you are working at your current job.