7 Surprisingly Easy Ways to Spot Personal Loan Scams

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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. 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 to help you understand what you are buying. Be sure to consult with 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.

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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.

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Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. 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 to help you understand what you are buying. Be sure to consult with 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.

RATES (APR)loan amount
5.99% – 17.88%1 $5,000 to $100,000
5.69% – 35.99% $1,000 to $50,000
6.98% – 35.89%* $1,000 to $50,000
5.99% – 24.99%3 $5,000 to $35,000
5.99% – 29.99%4 $7,500 to $40,000
15.49% – 35.99% $2,000 to $25,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 17.88% APR (with AutoPay). Variable rates from 6.49% APR to 14.70% APR (with AutoPay). SoFi rate ranges are current as of November 4, 2019 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 6.49% APR assumes current 1-month LIBOR rate of 1.81% plus 3.08% 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. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
    See Consumer Licenses.
  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. 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 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 5.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 5.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Personal loans made through Upgrade feature APRs of 6.98%-35.89%. All personal loans have a 1.5% to 6% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by WebBank, Member FDIC.

** 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.

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