Don’t Fall Prey To Loan Scams

By on January 23, 2013

There are lots of legitimate loan companies and accounts receivable lenders around that you can go to if you need to borrow money. That is why it is important to find a reputable finance company because sadly there are also plenty of scammers about who will either not give you a good deal or worse and charge you an upfront fee for a loan that never materializes.

Are You a Target?
Most loan scams are aimed at people who have credit problems and can’t access loans in the normal way. They’ll try to target people in various ways from newspaper and online ads to direct mail campaigns by post and email or even phone calls. So how do you spot a loan scam and avoid falling victim to it?

The usual mark of a loan scam is that they’ll ask for a fee. This might be described as an arrangement fee, an insurance fee or an application fee. The scammers may also claim that it’s the first month’s loan payment. Whatever it’s called, chances are if you pay it you’ll be waving goodbye to your money and you won’t be getting a loan either. If you’ve fallen for this and made an initial payment then you may well be targeted for more money. For example scammers will ask you to call a premium rate number if the loan doesn’t arrive. This won’t help you get your loan but it will cost you more money. They’ll sometimes ask for a second fee too, claiming that the first one didn’t arrive or as a completion fee. You may find that you get turned down for a loan after paying the fee but you won’t get your money back.

Loan scams are often linked to identity theft. You’ll be asked to provide your bank account information when you apply for a loan. Once they have your bank details the fraudsters may attempt to steal money from your account.

It isn’t always easy to spot when loans aren’t legitimate. Often the websites, logos and stationery can look professional and official so you need to look out for other warning signs. As we’ve said above, a request for an upfront fee should always set alarm bells ringing. If you’re asked for money up front – whatever name they dress it up with – this is a sure sign of a scam. Be especially alert if they ask for money to be ‘wired’ via MoneyGram, Western Union or similar as it can be very difficult to trace payments through these systems.

Other warning signs are companies that you’ve never dealt with before which contact you out of the blue saying that you’ve been pre-approved for a loan. A genuine loan company will always base its decision on your credit history and your ability to pay.

Don’t Feel Pressured
If you’re phoned by someone offering a loan they’ll often pressure you to make a quick decision. This is another sign of a scam, don’t agree to anything; instead ask to see details of the loan in writing or simply put the phone down. If you’re approached by a company you haven’t heard of look it up online to see if it’s a known scammer.

So what do you do if you’ve been offered a loan that you think might be a scam or if you’ve fallen victim to one? If you get unsolicited letters offering you loans the best thing to do is ignore them. If you’re not sure whether a company is genuine or not try looking it up online or take the letter along to the Citizens Advice Bureau.

If you get emails offering you loans simply delete them. Never reply or click the link asking to be unsubscribed – this simply confirms that your address is active and you’ll only end up getting more spam.

Report it!
Anyone who thinks they may have fallen victim to a scam should contact the Citizens advice Bureau. You may not get your fee back but you can help other people avoid falling victim to the same trick. If you’ve handed over personal and bank details then take care that you haven’t fallen prey to identity theft. Check your statements carefully for unexpected transactions.

Loan scams target vulnerable people and offer them an easy solution to their money problems. If the deal sounds too good to be true, if you’re asked to pay a fee or if you feel you’re being pressured into making a decision then you should walk away.

Stuart Edge is a freelance writer who offers sound advice when saving money as he specialises in finance. He recommends that you always go to a legitimate company for loans to avoid falling prey to scams.

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