7 Surprisingly Easy Ways to Spot Personal Loan Scams

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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!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 6.58% APR to 14.87% APR (with AutoPay). Variable rates from 6.275% APR to 12.575% APR (with AutoPay). SoFi rate ranges are current as of July 16, 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 6.275% APR assumes current 1-month LIBOR rate of 2.10% 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

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), 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.
  1. 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.
  2. 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

  • Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), 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.
  1. 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.
  2. 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.
7.73% – 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
6.28% – 14.87%1$5,000 - $100,000
Check rate nowon SLH's secure site
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% – 29.99%$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%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.