Personal loans are an excellent option when you need fast, flexible funding in one lump sum. Many people rely upon this type of traditional installment loan when unexpected expenses arise in an emergency or time of need.
However, consumers need to be mindful of the prevalence of loan scams and be vigilant in choosing a reputable lender when they need financial assistance. According to the Federal Trade Commission, consumers lost over $10 million to various types of fraud, including personal loan scams, in 2023 – a 14 percent increase from 2022.
In this article, we cover how to check if a loan company is legitimate and how to spot loan fraud to protect yourself in our modern, digital world.
Understanding Personal Loan Scams
A personal loan scam occurs when a fraudulent person or company uses fake lending sources to obtain money or personal information without actually lending it. It is a loan offered under false pretenses and based on a promise that will never be delivered upon. Loan scams often involve a fake lender asking for your social security number and other identification information and then selling that information to commit identity fraud.
Fraudsters may promise loans while asking for upfront fees and without running a credit check to entice consumers to trust and work with them. They may use fake names, logos, and caller ID phone numbers to pretend to be a legitimate company and gain your confidence. Scammers may try to trick you into clicking a link to obtain your personal information, charge high fees for loans that never materialize, or pressure you to act immediately.
As you navigate the lending landscape, it’s important to be aware and cautious about personal loan providers that seem questionable. Personal loan scams target vulnerable individuals who are in financial binds seeking help. Scammers illegally look to take advantage of consumers in their weakest moments and leave them worse off for their own financial benefit.
Spotting Personal Loan Scam Red Flags
Scammers can drain your bank accounts and leave you in greater financial hardship than you were before if they steal your money and personal information. Knowing the red flags to look for can help you be a smart and savvy borrower.
1. Unrealistic Guarantees
If something sounds too good to be true, it probably is. Loan scammers will often advertise unrealistic and over-the-top offers to attract consumers. These offers are especially enticing if you have bad credit or urgent financial troubles.
However, legitimate lenders require thorough evaluations of a person’s financial situation to award a loan. To be eligible to receive a loan, detailed documentation is required. A lender must evaluate your creditworthiness before extending a new line of credit, so it is impossible to guarantee an upfront approval without the necessary information supplied first.
2. Upfront Fees and Hidden Costs
Other loan scam red flags involve upfront fees and hidden costs. These financial details are often buried in fine print, so you don’t notice them when you desperately need fast cash.
Meanwhile, reputable lenders typically deduct fees from actual loan amounts or include them in repayment terms. They are also upfront about all costs you will incur during your loan period.
3. Pressure Tactics
A reputable loan company will never make you feel rushed to make a decision about a personal loan. Legitimate loan companies are patient and willing to work on your timeline and answer all the questions you have about the lending process. They never threaten you with negative consequences or legal action if you fail to act right away.
However, scammers frequently use high-pressure tactics to push people into financial commitments they are unsure about or aren’t ready for. Don’t fall for false claims that a loan offer is “expiring soon,” because personal loans do not have expiration dates. A legitimate loan officer should never make you feel fearful, nervous, or confused.
4. Questionable Unsolicited Offers
Legitimate lenders, such as Western Shamrock, may send live checks to potential borrowers, which are unsecured loans that can be immediately signed and deposited into a bank account with no application process or hard credit score check. These paper checks are initiated by lenders through a pre-screening process that involves a review of your creditworthiness and minimum credit score.
However, it is important to confirm the legitimacy of unsolicited loan offers you receive in the mail before depositing the money. Unfortunately, some scammers impersonate legitimate loan companies and send fake loan offers by mail, email, and text message to commit fraud and identity theft. Carefully review the loan agreement so that you understand who the company is that sent it to you and what the repayment rate is.
5. Vague Contact Information
Transparent communication channels are essential when applying for a loan. Always verify potential lenders’ contact information to avoid loan scams. If phone numbers keep changing or your loan officer is difficult to reach, these could be red flags.
It is common for loan scammers to hide their contact information to make it difficult to get back in touch once money goes missing. However, legitimate loan companies always make their phone numbers, email addresses, and web contact forms readily accessible and available.
6. Lack of Physical Address and Licensing
Legit lenders operate from verifiable physical locations and are registered with regulatory agencies. This is in contrast to scammers, who operate anonymously and cannot be traced to an actual address. You may wish to visit a loan branch office in person so that you feel more comfortable with the legitimacy of the business and the professionals working there.
7. Review a List of Fake Loan Companies
Fortunately, the internet offers a wealth of information about loan scams through customer reviews and online forums. You can search for a loan scammer list on Reddit, Quora, or Google to read about other people’s experiences with fraudulent lenders.
There are also numerous blogs, LinkedIn articles, and news reports about the latest trends in loan scams and lists of companies to avoid. Before giving your personal information to any lender, review a list of fake loan companies for your own safety and peace of mind.
8. Know the Signs of a Bad Loan Officer
The loan officer you are dealing with should make you feel comfortable and confident about obtaining a personal loan. Signs of a bad loan officer include unreasonable promises and unexplained delays in the processing of your loan.
You may face loan legitimacy issues if your officer cannot answer questions like “Is lending for bad credit legit?” Fraudulent loan officers will avoid answering your questions, leave out or falsify information, and hide discrepancies in the terms and conditions of your loan. With a fraudulent loan company, you might notice vastly different interest rates than other lenders or be asked to pay fees to access your loan funds.
Steps to Take If You Suspect a Scam
If you suspect loan fraud, taking action immediately before the scammer gains access to more of your personal data is essential. Don’t delay taking action because you are overwhelmed or confused. Ask a trusted friend, family member, colleague, attorney, or financial professional for help to get an outsider’s perspective on the situation and evaluate the legitimacy of your interactions with a questionable company.
Here are the steps to take if you think you are dealing with a loan scam:
- Take the time to read all the fine print
- Stop all communication with the company immediately
- Contact your financial institution to stop all payments to the company
- Gather evidence about your communications to this point
- Report the scam to the appropriate authorities, such as the Consumer Financial Protection Bureau and the Federal Trade Commission
- File a police report with your local police department
- Monitor your financial and personal accounts for a while
- Consider freezing your credit to prevent additional fraud
- Verify whether your homeowner’s insurance policy includes coverage for fraud and identity theft
Finding a Reputable Lender
If you are wondering how to check if a loan company is legitimate, you’re in the right place.
Western Shamrock is a trusted lender with locations throughout Missouri, Oklahoma, and Texas. We are an industry leader in the consumer installment loan business and a member of the American Financial Services Association and the National Installment Lenders Association. We have nearly 175 branch offices and have taken an active role in maintaining relationships in the regulatory and political processes related to consumer installment loans.
As you compare and evaluate your lending choices, here are some tips to ensure you are working with a legit lender:
- Use legitimate channels to find a loan
- Confirm that a lender is licensed and registered in your state
- Verify lenders’ regulatory compliance
- Read online reviews about the lender
- Talk to people you know about their past lending experiences
- Prioritize transparency and security
- Go with your gut and use common sense
- Browse the lender’s website to check for ease of access and accurate information
Protect Yourself from Loan Scams
Each year, scammers become more creative and clever in their attempts to trick consumers into giving away their money and personal identifying information. It is more important now than ever to stay vigilant and proactive in protecting yourself against personal loan scams.
We encourage you to share your experiences about loan scams and report suspicious activity to the authorities so that scammers can be stopped. With your help, we can preserve the integrity of the loan industry and protect innocent people and their families from losing the money they need to support themselves and live fulfilling lives.
At Western Shamrock, we take pride in offering legitimate and affordable loans while also providing financial education to people in our communities.
As a trusted leader in the financial industry with over 50 years of experience and an unmatched dedication to our customers, we are here for you in your time of need. We value honesty and transparency in everything we do and look forward to helping you get the money you need for car repairs, medical bills, credit card debt, housing costs, holiday expenses, or something else.
We invite you to browse our comprehensive and straightforward website to learn more about our company and read the answers to commonly asked questions. You can find addresses, phone numbers, location details, and application links for each of our branch offices near you in Missouri, Oklahoma, and Texas.
If you have any questions about our business or how personal loans work, we welcome all of your questions and look forward to serving you.
