There are 4 ways to recognize a personal loan scam



If you want to get hold of personal loan for reasons such as debt consolidation or home improvement projectsIt is important to make sure that the lender you are trying to get money from is legitimate.

Scammers may try to rob you by asking for money in advance or by promising approval for a guaranteed loan. They may even impersonate a legitimate company and offer lower rates or commissions than the real lender advertises on their website.

However, you have many ways to protect yourself from personal loan scams. Here are four ways to recognize and avoid scams so you can borrow money without worry.

Before you think about a loan for any business, make sure it is legal first. Read reviews on external sites, check out the company’s offers Better Business Bureau Ratingand also ask friends and family about their experience in this business.

If you’re looking for comprehensive listings comparing many lenders, check out our guides on best online loans for individuals, best small personal loans, as well as best personal loans for bad credit history

“First, understand the interest rates and fees,” said Todd Nelson, senior vice president of strategic partnerships at the company. Light flow– told Insider. “Consumers often think that if the lender didn’t explain the rates and fees well enough, then they may have taken advantage of them. Homework is always very important and any reputable lender will be very open about their rates. and there are fees. “

Make sure the rate shown in your offer matches the rates advertised on the lender’s website. You may have to fill out some information to find out which grade you are prequalified for.

Also check out the rates indicated in the offer. Some lenders do not charge a commission, but others do charge a loan disbursement fee, late payment penalties, or prepayment penalties, so it is important that the fees you offer match those listed on the company’s website.

A classic tactic that many scammers use is to offer you a loan with the proviso that you send them the money in advance. They may promise to send you funds after receiving the first payment.

“Avoid anything that requires you to send money to a lender before a deal is made,” said Jim Houston, managing director of auto finance and finance at Jd power– told Insider. “Reputable creditors will not say, ‘You send me money now, and I will send you money later.’ It doesn’t work that way. ”

Some lenders may charge administrative or processing fees when you accept the loan, but these are usually deducted from the loan proceeds and only affect the total amount of money you receive.

Almost all lenders go through some kind of verification process before they can offer you a loan. Minimum credit scores differ depending on the lender, but most lenders take your credit rating into account when deciding whether to grant you a loan. Many companies will generate a soft loan request to show you customized rates.

If the lender asks for a minimum of information and guarantees approval, regardless of your creditworthiness or other financial factors, be careful. Some general information that a real lender might ask for includes:

  • Name
  • Reason for applying for a personal loan
  • Contact information, including your address, phone number, and email
  • Date of Birth
  • INN
  • Employment status
  • Whether you rent or own a house
  • How much do you pay for housing each month
  • Individual income
  • Family income

“Legitimate lenders will go through the underwriting process, especially for personal loans, because this is unsecured debt,” said Brian Walsh, CFP and senior financial planner at SoFi– told Insider. “The approval decision will be based on the creditor’s conviction that the borrower is indeed going to pay it back. To make an informed decision, they need to look at things like credit score, payment history, and debt-to-income ratio. Places that don’t do this pose a huge problem for me. “

Legitimate lenders do use a variety of methods to get you to borrow from them. You may see advertisements online or receive an email from a lender, but not every company uses each of these methods. Therefore, if you receive an email from a lender offering a loan, it is possible that the scammer is using the real name of the company to contact you.

For example, Lightstream will never make unsolicited calls, Nelson said. Contact each lender’s customer service number or email and confirm that the way you received your offer is legal.

Houston said counterfeit offers are less common in personal loans than with other types of loans, such as auto loans. But scams do happen, so know how to recognize them so as not to transfer your personal information to a fake company.

Ryan Wangman is a Research Fellow at Personal Finance Insider who writes on mortgages, refinancing, bank accounts, bank reviews and loans. In his past writing experience on personal finance, he has written about credit ratings, financial literacy, and home ownership.


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