If you need cash now, it’s easy to fall victim to a scam. Perpetrators make handing over your money or information as appealing and easy as possible, and that can go a long way if you’re desperate.
Offering personal loans is just one of the ways scammers try to take advantage of you, and learning how to avoid personal loan scams can save you a lot of time and heartache.
We’ve put together a list of seven warning signs to watch out for when vetting a personal loan offer.
How to avoid personal loan scams with these 7 red flags
The best way to learn how to avoid personal loan scams is knowing how to spot them. If you see one of these red flags, run the other way.
1. There’s no credit check
“All legitimate lenders require a credit check,” said Steve Weisman, a lawyer, lecturer at Bentley University, and blogger at Scamicide. “If the lender indicates that it does not require any credit check, it’s either a payday loan or a scam.”
That can be a buzzkill if you have poor credit and aren’t sure if you qualify for a loan. But there are personal loans for people with bad credit. And while their rates and fees aren’t favorable, they’re a much better option than getting a payday loan or falling victim to a scam.
2. The lender isn’t registered in your state
If you’ve heard of the lender before — scammers aren’t going to pay for radio, TV, or online advertising — you’ll typically find out upfront whether it’s registered in your state.
But if the lender is new to you, make sure to do your research before applying.
“Personal loan companies are required to be registered in whichever states they conduct business,” said Justin Lavelle, social media director for BeenVerified. “The registration normally takes place through the state attorney general’s office.”
Many personal loan companies list the states in which they operate on their website. But even then, contact your state’s attorney general’s office to double-check.
3. The scammer charges upfront fees
Even some of the top personal loan companies charge an origination fee of between 1% and 8% of the loan amount. But when and how you pay those fees is the key.
“Loan fees are generally paid out of the loan amount,” said Weisman, which means that you don’t write a check or directly send money to the lender. “Origination fees paid in order to merely apply for the loan are a good indication that it is a scam.”
And keep in mind that scammers might call this fee by another name, such as an application or processing fee. Regardless of the name, it’s best to avoid lenders who require some sort of direct payment to apply or get your money.
4. The lender’s website isn’t secure
Whether you’re looking for a personal loan or doing anything else online, always check the address bar at the top of your browser for two things:
- A padlock symbol.
- A web address that begins with “https.”
Both of these signify that the website is secure. But even if the website does show the padlock icon and “https,” that’s not a guarantee that it’s legitimate.
For example, you might get a warning from your browser that the site’s certificate has expired, or there might be other red flags you’ve noticed, such as a misspelled URL or the original URL redirected to a different website.
As a result, it’s still crucial that you do your due diligence to avoid a scam.
5. You notice grammar and spelling mistakes
I recently wrote an article about a personal loan company no longer issuing loans and shared some alternative options. But as I researched the lender, I saw a website that posed as a lender with the same name.
I soon spotted some things that seemed off. For example, the website said:
- “Quick cash Shipping and delivery. Find Funds Today.”
- “Searching for $1000 cash loan. Obtain money quickly these days. Cash loan fast in fast time.”
Sure enough, when I emailed the customer support address on the website, the email came back undeliverable. But had I clicked through and applied, I might have given a scammer all my personal information, including my Social Security number.
“It may seem a minor matter, but pay careful attention to the grammar and spelling in any emails or advertising you may see for personal loans,” said Weisman. “Many personal loan scams originate in other countries where English is not the primary language.”
6. The offer was unsolicited
It’s common for lenders to send offers in the mail, especially if you’ve applied with them before. But email is a different story, according to Lavelle.
“If you didn’t request information for a personal loan, an unsolicited email loan offer should be a red flag,” he said.
This type of email can be a phishing attack, which is set up to steal your personal information. Links in the email could be embedded with malware that can hack your computer and access your personal documents.
All that sounds terrifying, but avoiding it is simple, said Lavelle. “Don’t open any email link or attachment from an unknown source,” he said.
Also, note that scammers can subtly change emails to make it look like it’s from a lender. Check the email address to see if the address is the lender’s website, and know that legitimate lenders will never ask for your personal information or money over email.
7. The lender gives you a deadline
Scammers use urgency to manipulate their victims.
One way they do this is by telling you that the offer won’t be around tomorrow and that you have to act now. Legitimate personal loan companies don’t typically offer special time-based promotions, and they certainly won’t pressure you into making a decision immediately.
Finding the best personal loans online
Learning how to avoid personal loan scams isn’t too hard if you know what to check. In most cases, if something feels off, it probably is. There are several legitimate personal loan companies, but finding the best personal loan can take more time.
The best thing you can do is to compare several personal loans and their terms. Besides checking interest rates and fees, also consider other features such as customer service, loan amounts, and repayment terms.
You can usually find all this information readily available online, and some lenders even allow you to get pre-qualified with an estimated rate. This type of process is a sign of a legitimate lender, and taking the time to go through it will help you find the best personal loan for your needs.
Interested in a personal loan?Here are the top personal loan lenders of 2018!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** 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||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|8.00% – 25.00%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|