Scams: they’re everywhere, seemingly just waiting to separate you from your hard-earned cash. But what scams are the most common when it comes to personal loans? If you’re in the market, make sure to compare personal loans thoroughly before landing on one to be sure you are not getting scammed.
Here are a few of the scams you should watch out for:
1. The “Advance Fee” Scam: In this scam, you’ll be asked to pay a fee to secure a loan. The problem is that once you pay the fee, you’ll never see the loan (or your money) again. This is a common scam that preys on people in need of quick cash.
2. The “Phantom Loan” Scam: This one is similar to the advance fee scam, but in this case, you may receive the loan funds that you were promised. However, the terms of the loan will be so onerous (high interest rates, short repayment periods, etc.) that it will be impossible to repay. Or, the lender may simply disappear after cashing your check, leaving you stuck with the bill.
3. The “Identity Theft” Scam: This is a particularly insidious scam because it can do more than just empty your bank account. In this case, scammers will use your personal information to apply for loans and credit cards in your name. Then, they’ll run up huge debts, and you’ll be the one stuck with the bill (and the poor credit score).
If you’re considering taking out a personal loan, be on the lookout for these seven red flags:
1. Upfront fees. Personal loan scammers will often try to collect upfront fees before disbursing any funds. Be wary of any lender who asks for payment before you receive your loan.
2. High interest rates. Personal loans should have reasonable interest rates, so be suspicious of any offers with sky-high rates.
3. Pressure to sign quickly. Scammers may try to pressure you into signing a loan agreement before you’ve had a chance to read and understand it fully. Don’t be rushed into deciding on a loan.
4. Unsolicited offers. Be wary of unsolicited personal loan offers, especially if they come through email or social media. If you didn’t initiate contact with the lender, it’s likely a scam.
5. Vague terms and conditions. Personal loan agreements should be clear and concise, so be suspicious of any that are full of legal jargon or are otherwise difficult to understand.
6. Requests for personal information. Personal loan scammers may try to collect sensitive information like your Social Security number or bank account login details. Never provide this type of information to someone you don’t know and trust.
7. Guaranteed approval. No legitimate lender can guarantee that you’ll be approved for a loan, so be wary of any that make this claim.
If you’re ever unsure about a personal loan offer, it’s best to err on the side of caution and avoid it altogether. And if you do fall for a scam, be sure to report it to the proper authorities so that others don’t fall victim as well.
