Scams are ubiquitous in the loan industry since it deals with money. Many opportunists have their eyes in the industry and make it a platform to perform exploitation. These criminals evolve with the technology, and now their stunts have become more convincing. If you are not careful and knowledgeable about these loan scams, you will get caught with their baits.
When dealing with money, you should be more vigilant, or else you’ll be easy prey to loan scammers. Be careful who you trust and familiarize yourself with the difference between real and sham business loan offers. You don’t need to be an expert to spot legit loan services. There are just certain pieces of information that you need to familiarize yourself with.
It is normal that we look for a hassle-free transaction and a fast and sure approval when we apply for a loan. But there is no such thing since all legitimate lending companies have a standard procedure when approving a loan. They are following some guidelines that their institution must comply with to assure the security of their company.
The Common Loan Scams You Should Avoid
Almost all aspects of the financial industry have a loophole where a criminal can dig its nose into and use it to deceive anyone who knows nothing in this service. Don’t be a victim. Take Your Cue From These 5 Most Common Loan Scams That You May Encounter:
Peer-to-Peer lending scams
Peer-to-Peer or P2P lending is a legitimate lending platform, but there are criminals that use P2P to victimize innocent individuals. They usually use Facebook Messenger as the approach of their heist.
You will receive a message through Facebook Messenger that will offer you peer-to-peer financing. They will persuade you by saying they can release quick cash and a guarantee loan approval even if you have a bad credit score. Don’t fall for this, though P2P Lending is safe if you use an authentic platform to acquire it. Using any less traditional approach is a big red flag.
Some individuals are more comfortable in P2P Lending since this platform is readily available online. P2P is less restrictive when it comes to the purpose of the loan. If this is your only option for financial aid, you should not hesitate to ask as many questions as possible.
If they are legit, they won’t bother answering all your queries, they don’t have something to hide after all. Someone who hides something will divert your inquiries and blind you with their deals that are too good to be true.
Consultancy fee scam
The consultancy fee is legal, but it is not necessary. This scam mostly targets individuals who are not familiar with the loan process. These individuals tend to seek guidance from consulting firms where they are charged with consultancy fees.
They even throw themselves at you by approaching you and offering their service. Aside from guidance, they also offer you an all-exclusive low-interest deal, which doesn’t exist. This kind of service is not necessary since you can do it yourself. There are many loan articles available online where you can educate yourself.
Credit repair scam
Having good credit is one of the vital pieces when it comes to the credit industry. This is true for both individuals and businesses. Business owners are anxious if they have a bad credit history. This is the weak spot that most credit repair scammers are looking out for.
These criminals will convince you that they have the capability and resources to help you revamp your credit scores. This is an impossible attempt as it will take several months or weeks to improve your credit score, thus making this offer a plain waste of time and money. You can’t alter a credit score within 24 hours.
Though there are credit counselors who can truly help you to enhance your credit scores, and these counselors won’t ask for an upfront payment for their service. And take note that they don’t promise a result within the 24hr period.
Scammers won’t’ disclose your rights and they will avoid that topic as much as possible. They will even tell you not to contact any credit reporting company. If someone is doing their business legally, they won’t be scared of whatever and whoever, especially the authorities.
Upfront payment scam
Always put in mind that legitimate lenders don’t require any advance payment. These culprits will convince you by offering a zero percent interest fee, or a no credit requirement to obtain the loan from them. They usually call their targets via phone and convince them to acquire a loan from them.
There are key points to identify this type of scam. First is when a lender doesn’t care about your credit record. Legitimate lenders, including banks, are very observant in all their client’s credit scores. They always conduct a background check of the applicant’s credit history.
Lenders who use this scheme also asked for payments that are not disclosed at the beginning of the process. This scam is one of the top five marketplace scams, so you better beware.
There are two scenarios in this type of scam, though both offer cash funding for your business. The first scenario will be from a supposed affluent investor that will provide financing support for your business. He will assure you that he has cash ready to be invested in your business. But before it happens, he will ask for money from you for a background check and to pay for the paperwork.
The second scheme will come from the government, offering you a funding kit. They will say that you have received a Government Funded Grant that you can use for your business, but of course, they will ask payment for the said “Kit” that will aid you through the process.
If in case you did apply for a grant, just take note of the red flags that were already stated and decline the offer as soon as you noticed something is wrong. Don’t let those scammers waste your time.
These are just a few from what else is out there. Many opportunists had strategized their scheme very well to make it look legit. And they always create a new way to exploit, if they feel their old ways don’t work anymore, these criminals still have a lot of tricks on their sleeves, and they can perform it anytime. Just be cautious about whoever you are dealing with and be suspicious.
How to Know If The Loan Isn’t a Scam?
In the loan industry, legitimate loan companies were outnumbered by the illegitimate lenders. When looking for a loan company, there are many ways to detect the lenders’ legitimacy. Here are some tips on how to check the lender’s authenticity.
First, you have to check the address of the company. If the address has a P.O Box, that would be a warning. They should have a street address instead. Their address should be available online. If you can’t find their address everywhere, that is another warning that the lender is not authentic.
Second, you should do your research. This tip should be a must, especially when dealing with money. Check the company’s background on your local Business Bureau Database, the lending company’s ratings, reviews, and other vital information should be in the database. You can do a quick survey on the Bureau’s website using the company’s information you have in hand.
Third, you can check the Financial Registration Agency if the specific lending company is registered in this agency. Loan companies are required to register with the state’s agency before they can operate.
Next, you have to be attentive to the company’s name. Scammers named their companies based on a famous and respected institution. These scammers have forged documents that they will produce when you do a background check. They mostly pretend to be associated with the Better Business Bureau or major banks.
Last but not least, you can consult a lawyer if you want to be extra careful before agreeing to any contract. An extra eye from someone who knows the law may help you identify the company’s legitimacy. A lending company should allow you to think through the agreement. If the company rushed into an agreement, consider it as a red flag.
What To Do If You Fall For a Loan Scam?
If you are already a victim of a scam, then all you need to do is take some action. First and foremost, you have to report it to the proper authority. You have to report the incident to the police. If you have credit or debit cards that have been compromised, report it to the bank where you acquired those cards.
Also, check for a local government agency that handles this kind of incident. There are agencies that are focused on this kind of issue. You just have to do your research or ask the authorities if they can recommend an agency for you.
Though these agencies rarely track down the culprits in this kind of crime. They will only use the report to create a pattern that authorized them to take action against a specific company.
Robbers are everywhere; they can and will prey on whoever they want. At this time and age, they can perform their heist anytime and anywhere. The best thing to do is to apply from a legitimate and legal lending agencyand always double-check the company you are going to apply for your loan from. Do not trust anyone that will come to you and offer you deals that are too good to be true.