Personal Loan frauds are common nowadays as people do not know how some companies try to take advantage of needy people at this time of Covid-19 Pandemic. Personal loans, especially short term ones, have earned a pretty grisly reputation. In truth, this reputation is built off of actual horrible experiences people have had with predatory lenders in the industry. But what carries just as much truth is the fact that not all personal loan companies are predatory.
Many personal loan companies exist to provide a genuinely useful service to their borrowers. If this wasn’t the case, then the personal loan industry would not have surged 17% last year to become valued at $138 billion overall. The fact is: people need solutions for their short term financial problems, and both legitimate and not-so-legitimate companies are out there to provide them financial options.
To ensure that you are not wrapped up in a personal loans scam, fake loans, frauds, or schemes, always perform extensive research and due diligence. Know the exact company you are getting a loan from, and get your terms in writing before you ever sign any sort of agreement.
At Your Own Funding, we want to help potential borrowers out by pairing them with lenders that offer up-front terms with no hidden fees, no unfair penalties, and an easy-to-use calculator that estimates their total amount paid for their loan. By doing all of these things, we hope that our customers will avoid looking to other so-called lenders that intend to trick them out of their hard-earned money.
What are Personal Loan Frauds?
Personal loans scam is a type of crime that prey on consumers, actively looking for a quick solution to their financial needs. Usually, the online loan related frauds are what you shall find really difficult to escape from. Personal loan frauds are a kind of a misread act that involves victimizing you as a genuine borrower.
In personal loan scams, the lenders might behave with you convincingly enough to prove themselves as the most genuine lenders. But the truth and the motive is quite obvious, that is to harm your data integrity and finances. (as when you’re a borrower) Thus, people are easily getting vulnerable to loan scammer as a crime. The reason being most of the borrowers are/ might be in desperate need of emergency funds nowadays.
What signs could a fraud lender might display for you to be aware of? A fraud lender might not be taking any interest in your payment history or might not be very transparent about their hidden fees. Moreover, a fraud lender might be having no particular physical locations and (online) verified customer reviews. Identifying signs like these beforehand would prevent you from becoming a victim of personal loans scam.”
To help you spot red flags the next time you are researching personal loans, keep an eye out for the nine most common fake loans, tricks, traps, and schemes below.
Summary: 9 Most Common Personal Loan Frauds to Avoid
- Application Fees and Other Up-Front Fees
- “We Lend to Everybody, No Credit Check Required”
- Hidden Fees and Costs
- Forcing You to Get Loan Insurance
- Tantalizing Loan Perks That Disappear if You Make a Late Payment
- Preloaded Interest and Early Payment Penalties
- Pressuring Borrowers to Do a Rollover or Extension
- Imposter Lenders Calling about Debts
- Lenders Who Flat out Steal from Your Account
1. Application Fees and Other Up-Front Fees
Some lenders charge fees for their services in addition to interest. This can be perfectly acceptable, as long as the borrower knows what these fees are beforehand and agrees to them in exchange for access to the funds they need.
What is unacceptable is charging a fee without a signed agreement guaranteeing a loan. Many personal loan frauds offers ask applicants to give them money before their loan is ever even processed. Some will even disappear after they get this fee, never to be heard from again.
To prevent this scammer loan from happening, never pay for a loan you aren’t 100% sure you are approved for. No on-the-level lender will ask you to give them money before your loan agreement is drawn up, ready for you to review and sign.
2. “We Lend to Everybody, No Credit Check Required”
Even if you know you have bad credit, you should still want your lender to review your credit score to see if you qualify for lower interest, lower payments, or some other sort of better arrangement.
Companies that promise that anyone can get a loan may either have unreasonable terms or may not be a true lender at all. We are not saying that every company that foregoes a credit check is illegitimate, but you should always beware of offers that sound too good to be true.
3. Hidden Fees and Costs
You almost always have to pay money to borrow money; that’s a simple fact of life. But at the very least, you should know what you are going to pay ahead of time and have it in writing.
In fact, the Truth in Lending Act requires that all terms and conditions of a loan are available in writing and that the lender follows these to the letter. If a company promises one thing but then surprises you with fees and other costs, they could potentially fall into big trouble with the Federal Trade Commission (FTC).
You can even report a deceptive practice or suspected scam to the FTC if someone tries to take advantage of you.
4. Forcing You to Get Loan Insurance
Some secured loans require you to pay extra for insurance against the loan in case you fail to pay the loan as agreed. The most typical situation where you will see this is with home mortgages where the buyer cannot put up the requested down payment.
However, a short term, unsecured personal loan will almost never need this extra insurance. Lenders who say that this insurance is mandatory or standard practice should be looked at with scrutiny.
If a lender pressures you into buying insurance or other related products you really feel like you don’t need, then don’t be afraid to walk away.
5. Tantalizing Loan Perks That Disappear if You Make a Late Payment
No interest? Cash back? Free gift cards? Loan perks like these can make you feel like you will come out of the other side of a short term personal loan with more than you started with.
Unfortunately, a lot of these promises sound too good to be true for a reason. Lenders often offer these perks under the condition that you make all payments exactly on time. Missing your payment by a day or just a few hours can not only mean you don’t get your “prize.” It can also mean unfair penalties.
Stay safe from personal loan frauds and Always consider the full costs of a personal loan and the penalties associated with failure to make payments. If you see any terms that seem unfair, don’t let the promise of goodies convince you that those risks are worth taking.
6. Preloaded Interest and Early Payment Penalties
This type of loan trap is, tragically, standard practice for most loan providers. They intend to make their money off of interest regardless of whether the customer pays early or not. Some even have the gall to punish you with extra fees for paying early!
Only take out loans that let you pay it off early without any extra penalties. Ideally, early payment will also reduce the interest you pay. You should be rewarded for early payment, after all, not punished!
7. Pressuring Borrowers to Do a Rollover or Extension
Lots of “payday” lenders and other short term personal loan companies count on their borrowers not being able to pay in full by the due date. The company will then offer to “rollover” or extend the loan for an additional fee. These fees can rack up pretty quickly, and sometimes they will result in more interest paid than you initially agreed to!
Having the option to roll over or extend your loan is fine, but you want to avoid it at all costs if possible. Be especially wary of lenders that automatically roll over your balance because they can charge you fees without you even noticing.
8. Imposter Lenders Calling about Debts
A personal loan application contains a ton of sensitive personal information. This info can include your name, address, phone number, workplace, social security number, and even your account information.
Some lenders will leak or sell this information to con artists. The con artist will then use the information to harass the borrower, pretending that they are calling about the existing loan or some other loan the borrower supposedly forgot about.
Know exactly who your lender and loan servicer is, and never give out personal details over the phone or email. Even if the person on the phone is who they claim to be, you can always hang up on them and go online or in person to make payment arrangements safely.
9. Lenders Who Flat out Steal from Your Account
If you give a personal loan company access to your bank account, keep a close eye on transfers. Some companies draw from borrowers’ accounts without permission for fees and other charges that really don’t exist.
This is a huge violation of the law! The FTC even made one company repay victims $505 million for all of the funds it basically stole directly from its borrowers.
What to do If you have been a Victim of Personal Loan Frauds?
how to get a small business loan with bad credit? If you needed a short term personal loans, but have been the victim of a loan scammer then it is best to contact police nearby or local law enforcement straight away. You can also contact the Better business bureau and federal trade Commission as they will also be helpful knits. Also, you have other various options to notify like FBI and State Attorney General. Additionally, there are websites that are designed to look legitimate in a strive to steal visitors’ personal information then you can report it to google. Here is how you can report it to google-
1. Take out the mail, address and telephone number of fraud company
2. Explain when and how you became the victim of a personal loan scam.
Practice Caution and Protect Yourself against personal loan frauds by Working with Trustworthy Personal Loan Providers
Whether a loan company is doing something that is illegal, unfair, or just plain sneaky, remember that an ounce of prevention is worth a pound of cure. Read up on any lender that is offering you a personal loan. Try to see if they have existing complaints, unhappy customers, or pending litigation.
Compare multiple loan operators to find the right ones for you. Get everything in writing, and review your terms and conditions carefully. Be aware of the laws for short term personal loans in your state to see if the company is asking you to do something that’s illegal.
Finally, either it’s about how to get a car without credit, or an emergency loan, or any kind of personal loan, know that there are options out there that want to help rather than hurt your financial situation. Also, The personal loans scam should be reported to the police immediately at the point the debt would be released from you. By working with an online loan company for bad credit like Your Own Funding, you can gain all of the benefits of the short term personal loans without getting burned or burdened by unnecessary debt.
Anti-Personal loan scams: Distinguishing between the Genuine and the Scams-
As a young teenager, we have always been warned not to give any personal details over the unknown rings on our parent’s phone, right? Even today, as we have grown up quite mature, it’s our guardians who love us enough to remind us that we need to keep our bank’s account number, PAN card, and such details safe. Being aware of this fact now, we all know the reason for this, for sure, is: Online Frauds and Scams. The most illegal one and still being an activity in practice, is Personal Loan Scams, agree? The Loan Scammer Program is a risky business these days, as stated by the Federal Trade Communication(FTC) in collaboration with the Internet Crime Complaint Centre of FBI. The two of these, along with the 320 million (approx.) of population, are dumbstruck seeing the sight of increasing online Loan Scammer activities.
Eliminate the distinctions :
Lets take a real life example
What may appear to be genuine may be taking you to trap yourself in a personal loan scams:
To explain this clearly , I recently had a phone call (from an unknown number) from a person confidently addressing him as a relative of mine, asking me to tell my account number to him so that he could transfer some amount of cash as a part of a loan agreement with my father. I was convinced to trust him by his sweet words of greetings and that he knew my father’s name, too !! I was perplexed at that moment, to which I cut the call and informed my father. I then came to know that there was no such agreement that he had signed with someone. That made me realize that I was almost going to trap myself up in the Personal Loan frauds. So, the moral behind telling this incident is to remind you not to trust anyone how respectful they may seem to be, without checking for the details from your surroundings. Be as clever as a fox !!
Keeping Account Details Secure even Digitally !!
With the advent of Cloud Storage, we feel privileged saving our every personal detail over the Cloud i.e. over the internet. Until now, we all have realized that more than 80% of the frauds that try to victimize us are online. Then, who knows whether the data we enter into the hands of the Cloud could not be attacked by Cyber Hackers’? This is not at all to frighten you, my friends, rather it is just a warning to keep your account details secure even if you are doing it digitally. Look here how you can do this:
•Keep a separate folder if you wish to obtain your data over online: in clouds and other applications as such. This single folder only should contain your details.
•Make sure that while storing the data in this folder, you encrypt your envelope with a really strong password, which is difficult to decrypt.
•Also, please don’t share this folder to any other person unless you have found it’s urgent and genuine to be sent. (not even your relatives!!)
•Keep changing the passwords for your cloud logins and personalized folders.
• Remember to jot down the passwords in some of your personal diary, which again should be kept locked in the house and not shared with anyone.
So, this was in general, brief notes to keep our accounts safe, secure, and sound. Now returning to the personal loan frauds, once we have secured the details over the internet, we need to handle the offline part. Let’s see how the risks that we might or already have encountered linked to the Online Personal Loan Scams:
1. The very first is what we have previously discussed above as in through the phone call incident. To add more into this is just that we need to take extra caution while attending an unknown call, We need to be prepared to respond if that’s going to be a call regarding our bank transactions/details, hope you have that, right?
2. The next thing to keep in mind is that we should be in touch with our bank and their personal contact details and email ids. This would help us to recognize and keep a check upon when the bank is actually trying to reach us related to loans or something else. This shall definitely decrease the risks of us being trapped into some malpractices Personal Loans Scam practices.
3. The application fees when we have acquired a Personal issue Loan is not what is demanded immediately before even having the loan accreditation in our account. So we need to act like a smart bird before making any outgoing transaction for the sake of an incoming one. To be very clear, just what we need to do is recheck and verify from our branch bank whether the procedure is right.
Moral: Don’t give any chance to the fraudulent loans and scam loan seekers to let you in the deep-holes dug up for you !!
Thus, keeping ourselves updated, aware, and knowledgeable enough through Bank policies, rules, and regulations prevent any mental, economic breakthroughs in such difficult times of adversities. We all don’t want to add more problems to ourselves during this pandemic. Thus, it is necessary to make a clear silver lining between the fake Loan Scammers and the Genuine Loan Providers.