Top 7 Signs of a Personal Loan Scam

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

Top-7-signs-of-a-personal-loan-scam

Sometimes a personal loan can be a godsend when you need fast cash for things like a replacement tire, visits to the ER, or home improvement work. Unfortunately, fraudsters like to take advantage of this, as well.

Search for personal loans online and it’s possible you’ll run across a few loan scams. What’s worse is that it can be hard to distinguish these loan scams from legitimate offers. Even what looks like a financial review could serve as a disguise for loan scams.

The good news: there are plenty of telltale signs when it comes to loan scams and we’re about to show you how to spot the fakes.

Your payment history is ignored

“All credible lenders disclose, on their site or over the phone, that they will pull your credit report,” says Elie Seidman, chief revenue officer at BorrowersFirst, an online company offering personal loans.

A lender ignoring your payment history is one of the most obvious signs of a loan scam.

A lending institution wants to know whether you pay your bills on time and in full. It needs some assurance that you’ll repay what you borrow.

Data from a single credit bureau may not be enough. The lender might look at all 3 bureaus — Equifax, TransUnion and Experian. Seidman says the lending site should reveal all this upfront.

The lender isn’t registered in your state

According to the Federal Trade Commission, lenders and loan brokers must register in the states where they conduct business. If a lender you’re interest in does not list any states, you could be dealing with a loan scam.

Visit the lender’s website to verify a list of states where it legally conducts business. Short of finding any evidence of this, you could also contact your state attorney general’s office for further verification.

Seidman says authentic lenders also must operate under a bank charter and advises prospective borrowers to look for that information on the lenders’ sites. For example, BorrowersFirst works with Cross River Bank, a bank insured by the Federal Deposit Insurance Corp.

A prepaid debit card is required

Next on our list of potential signs of loan scams is the “upfront cost” of getting a loan.

You shouldn’t pay to get a personal loan. Yet, scammers ask borrowers to provide a prepaid debit card for insurance, collateral or fees, says Tom Bartholomy, president and CEO of the Better Business Bureau of the Southern Piedmont in North Carolina.

“Once that card is in their hands, it can’t be traced. So, if someone on the other end asks for a prepaid card, run the other way.”

Legitimate financial institutions may charge a fee for your application, appraisal or credit report, but those charges are deducted from your loan, Bartholomy says.

The lender’s website is not secure

When visiting a lender’s site, be on the lookout for two things:

  • A padlock symbol on any pages where you’re asked to provide personal information.
  • An “s” after “http” on the site address so it shows as “https://www…”

If the site address doesn’t show “https” at the beginning, back away from your device. That “s” means secure. Bartholomy says not having that “s” is a possible sign of a scam or at least an insecure website. Fraudsters refuse to pay to keep their sites safe.

In addition to a padlock symbol, you should also be wary of any warning messages that might pop up saying a site’s security certificate has expired. These should all serve as red flags for potential loan scams.

“A site that isn’t secure means the owner is up to no good,” Bartholomy says.

The lender has no physical address

Make sure the lender you’re interested in has provided a physical location. Even then, you will still want to plug that address into Google Maps.

Bartholomy shared an account where his Better Business Bureau office had a fraudster give a Charlotte, North Carolina, address that proved to be a vacant lot. Sometimes you need to actually see the location in order to verify it and that’s where Google Maps can help. If you don’t find any indication of their location, you should avoid the lender as this could be a loan scam waiting to happen.

For an additional check on the business’ authenticity, dial directory assistance and ask for the lender’s phone number.

The lender isn’t really a lender

Some websites appear to offer different types of personal loans but aren’t actually lenders, says Lauren Saunders, associate director of the National Consumer Law Center in Washington, D.C. Their goal is to sell your personal information to the highest bidder.

“The buyers could be loan companies but also might be scammers that will go after you for debts you don’t owe,” Saunders says. “Be very wary about entering your financial information on any website.”
According to the FTC, a direct lender lends you the money; a loan aggregator is a middleman — a company that collects your personal and financial information on a loan application and shops it around to lenders who might offer you a loan.

Loan aggregators can sell a potential borrower’s information including their name, address, phone number, birthdate, Social Security number, banking account, etc. As a result, not knowing the distinction between a direct lender and an aggregator can open you up to loan scams.

Some aggregators use keystroke loggers — software that records what you type. So even if you never hit “submit,” but fill out the application and then change your mind about applying for the loan, your information may be captured through keystroke logging, and sold or used for dishonest purposes, the FTC says.

You’re urged to act immediately

Don’t fall for the urgency plea. Bartholomy of the BBB of the Southern Piedmont says the criminals often give you a deadline and say their offer won’t exist tomorrow. That’s why they need your prepaid debit card today.

Stay far away from anyone who puts pressure on you to act now.

This article originally appeared on Bankrate.com and was written by Heather Larson.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 5.950% APR to 14.490% APR (with AutoPay). Variable rates from 5.825% APR to 14.365% APR (with AutoPay). SoFi rate ranges are current as of May 3, 2018, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.825% APR assu[mes current 1-month LIBOR rate of 1.90% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank


Upgrade Bank Disclosures


  • Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.
  • Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% - 29.99%$1,000 - $50,000
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5.83% - 14.74%1$5,000 - $100,000
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5.96% - 35.97%*$1,000 - $50,000Visit Upgrade
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Check rate nowon SLH's secure site
4.99% - 29.99%$10,000 - $35,000Visit FreedomPlus
4.99% - 16.24%2$5,000 - $50,000Visit Citizens
15.49% - 34.49%$2,000 - $25,000Visit LendingPoint
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.49% - 18.24%$5,000 - $75,000Visit Earnest
9.95% - 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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