How to Spot a Loan Scam

A low credit history leads to a smaller number of loan options and higher interest rates. This often makes people with bad credit history consider borrowing money from non-traditional lenders. With the overabundance of online lenders, it is important to exercise caution, read the fine print, and follow tips to not get scammed. Here’s your brief guide on how to spot a loan scam on the Internet.

1. Approval guarantees

One of the most blatant red flags is when the lender promises loan approval without checking the borrower’s credit history beforehand. The fact is that no reputable lender will guarantee approval without previous review, so it is better to stay away from such offers.

Whether you are looking for a lender on the Internet, checking out apps like the payday depot loan app, or going to your local bank, be sure to always check the terms and conditions and ask for additional details when necessary.

2. Requirement to Pay Upfront

Some financial institutions may require a fee for your credit report or application; however, the cost is deducted from your loan. In the majority of cases, the legitimate lender will not ask for money in advance. If the lender requires you to provide baking details, prepaid debit cards (unlike debit cards, prepaid debit cards aren’t linked to your checking account), gift cards, etc., it’s likely a scam.

3. Lender’s Website Looks Fishy

First off, pay attention to the URL, also known as a website address: a secure site will use the HTTPS protocol instead of HTTP. The main difference is that HTTPS is far more secure, has an SSL certificate that keeps users’ data safe, and provides an encrypted connection between users and the website. Secondly, look for a small padlock icon near the web address; it means that information sent between the browser and the website is protected and can’t be intercepted.

4. No Registration in Your State

A trustworthy lender should have both a valid physical address and a license to operate in your state. The Federal Trade Commission requires lenders to register in all the states where they provide their services. Before taking a loan, you should check whether the chosen lender conducts business in your state. Go to the lender’s website and search for a list of states where it operates.

5. Pressure on You to Make a Quick Decision

If a lender contacts you first, visits your house, offers limited-time offers, and uses other tactics to manipulate you into making a quick decision, you are dealing with a scammer. Legitimate lenders neither cold-call their clients nor go door-to-door offering loans. Moreover, you should never give access to your banking information to unknown and unverified lenders.

With so many physical and online lenders on the market, it is often hard to ensure that you are not dealing with scammers. Before taking a loan, you need to verify whether the lender is licensed to operate in your state, has a secure website, does soft or hard credit history checks, doesn’t require you to pay upfront, or pressures you to act immediately. By following these simple yet effective bits of advice, you will minimize your chances of ending up scammed.

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