When you are in a financial emergency and need money quickly, a personal loan can seem like a solution to immediate money. However, a person is often vulnerable during medical or personal emergencies and at such times can avail a personal loan through a regulated system. Also, there are fraudsters who will take advantage of your immediate need and hence you need to be careful.
How can you determine whether a loan company is legitimate? There are several telltale signs of personal loan scams and once you’re aware of them, it’s unlikely that you will fall for them. Here are a few of these signs:
1. Guaranteed loan approvals
There is no guarantee for personal loan application approval - any company that suggests otherwise should cause you to think twice.
"The words that indicate the loan scam include the words 'guaranteeing loan approval'," explains Hill. "These scams promise people that they will be guaranteed approval regardless of their income, credit history, debt or credit score.These promises are often absurd and seem too good to be true. If it includes 'guarantee' in any language, it is a good sign that it is a scam. "
2. The lender isn’t registered in your state
If the lender is not registered, it is one of several red flags.
Before you fill out a personal loan application, check the lender's website to verify that it is approved to lend to borrowers in your state. The FTC requires lenders to register in the states in which they do business.If the lender does not have a list of registered states, you can contact your state's banking or finance department to confirm that it is legally operating. Good lenders will be happy to share information about the places they are approved to work.
3. The lender isn’t interested in your Credit check required
If a lender is not concerned about your credit score and is ready to offer a personal loan with a standard rate of interest, be careful. A legal financial institution would like to know whether or not you can repay the loan on time and therefore, have a relationship with your credit.
4. The lender demands a prepaid credit card
Reputed lenders may charge an application or credit report fee to begin the lending process, but they will request payment with a credit or debit card or any other personal payment. If the lender requires you to provide a prepaid debit card, it is almost certainly a scam. Prepaid debit cards are virtually inaccessible, giving you no recourse after purchasing and giving them. Do not do business with the lender who demands this payment method.
5.Unsolicited Communication
Reputed lenders typically advertise in the ways you expect them to, such as online or through other mass media. If you receive a loan offer by phone, through the mail or even through a door-to-door solicitation, be on your guard immediately. According to the FTC, companies have phone calls to the U.S. It is illegal to give loans in and ask them to pay before they are delivered.
6. The lender has no physical address
Every lender you are interested in should provide a physical location. Nevertheless, you will want to plug that address into Google Maps. In some cases, businesses running a personal loan scam will list addresses that are actually too empty.
If you do not receive a physical address symbol, avoid the lender. Many fraudulent businesses would be rather inaccessible so that they could avoid legal consequences.
7. The lender requires an immediate commitment
Do not fall for urgency. One of the loan personal scams is Hallmark giving you an immediate deadline to sign a loan as the offer expires early - possibly even the next day.
Lenders using such high pressure devices may not be good. It may be a trick to make a hasty decision.
8. The lender’s website isn’t secure
If the lender's website does not have an http 'followed by' after 'it is a red flag and you should stop surfing through such sites immediately. Lack of 'S' means the website is not secure and is a possible sign of a scam. If you take a loan from such website, they can use your personal information, which includes your bank account number and password.
9. The lender is not transparent about its fees
Scam lenders will avoid posting their fees prominently on their website or telling them when asked. They can also tell you that you have been approved for the loan and then demand a fee from you.
The hidden fees charged after loan approval are a red flag. The FTC website states that you walk away from any company that follows this practice, especially if you have stated that upfront money is for things like "processing", "insurance" or "paperwork".
10. Time-bound offers
If you get emails or see advertisements urging you to take a loan "right now" as this offer is only for a limited time period and will expire soon, be cautious. Banks offer loans at fixed rates based on your credit history. This type of pressure strategy is used to create a sense of urgency and trick you.
The Covid pandemic has significantly affected the economy. While it's beginning to decrease, joblessness in July 2020 is at 10.2%, as indicated by the U.S. Authority of Labor Statistics. What's more, in excess of a million people recorded an underlying case for joblessness benefits during the week finishing August 22, 2020, as indicated by the Department of Labor.
So, the demand for personal loans has increased considerably due to pandemic COVID - 19.
If you’re alert, cross check the details and opt for known financial institutions. This way, you will be safe.
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