Seven Ways to Spot Personal Loan Scams
Personal loan scams are fraudulent businesses that take advantage of individuals needing financial assistance immediately. Their goal is to convince you to lend money, but in reality, they are the ones who will take yours.
With these illegitimate business strategies, people often fall for them. Below are several ways on how you can spot and avoid personal loan scams.
1. The Lender is not Registered in Your Country
In the Philippines, a lending company is regulated by the Securities and Exchange Commission (SEC). In short, if a company is not listed in the SEC, it is not considered legal.
Before proceeding with any transaction, make sure to verify it is listed. Go to the SEC website, under the list of lending companies page. You can hover over the companies in alphabetical order.
2. The Lender has no Physical Address
Every lending company shall have a physical address where you can easily make transactions and raise your queries. It also builds trust and credibility.
Most fraudulent businesses avoid physical addresses to prevent possible legal actions. If you don’t find any physical address, do not transact immediately. Do thorough research. You can check them through Google Maps or their website to see if they have a P.O. box only.
If they own a P.O. box alone, ask how they do regular transactions.
3. The Lender is not Interested in Your Payment History
A reputable lender looks at the client’s credit history. They check your past and current loans/applications, revolving credit accounts with credit limits, late payments, and your overall credit status. This is to assess what type of borrower you are and how you manage your previous loan transactions.
If they see that you are a good payor, you can be approved immediately, but if they notice late payments, maxed-out credit cards, and similar scenarios, they might paint you as an unreliable borrower.
4. The Lender’s Website is Not Secure
Having a website is not enough, especially for lending companies. It should not be a website alone. It should be a “secured website.”
A secure website begins with “https.” “https” stands for HyperText Transport Protocol, while the small “s” means secure. HTTPs means every single piece of data passed between web servers and clients is encrypted.
Encryption is a method wherein all information is converted into a unique/ secret code to keep its true meaning and prevent unauthorized access.
If you notice that the lender has an unsecured website (using “http” only), do not provide information.
5. They are Pressuring You to Act Immediately
Beware of urgent pleas. If the lender is telling you to sign for a loan because it will expire within or the following day, it could be a negative sign. Lenders who are using high-pressure tactics may fall you into a trap. They are only giving you a rash decision.
Remember that a standard loan transaction involves submitting the requirements, background checks/interviews, review of the application, and the lender’s decision.
6. They Guarantee Loan Approval
There is no guaranteed loan approval. It will depend on your application, credit history, debt, identity, and other critical information.
If a lending company or person promises you a guaranteed approval, you should think twice. This is a clear tell-tale indicator of loan scams.
7. They are Not Transparent About the Fees
Any hidden fees are a red flag. As advised by the SEC, all lending companies shall disclose all relevant costs to ensure transparency to both parties.
The fees shall reflect on the website, Terms, and Conditions, and to each transaction.
Nowadays, loan scam strategies can be confusing. It mimics the typical loan business setup without noticing it, especially if you’re a beginner.
On your next loan application, make sure to observe them and see if they fall under these signs.