Loan scams: How to identify and avoid them?

As the number of digital consumers in United States increases, so do the number of scams and fraudulent activities targeting United States internet and smartphone users. The elderly and people with no economic education often fall prey to scams.

Lack of financial preparation makes a person more vulnerable to this type of fraud. Fraudsters often take advantage of a person's vulnerable position to offer fraudulent loans under the guise of raising funds quickly and easily without paperwork.

In this article, we discuss some common techniques for identifying loan fraud and ways to avoid it.

How to spot loan fraud?

Pre-loan processing fee

If the person giving you a personal loan charges a pre-loan fee, you should be concerned. Any personal loan will include a loan processing fee, but this price is usually deducted from the actual amount paid.

A financial institution will never ask a consumer to make a prepayment until the loan has been repaid. The first sign that a loan is a scam should be if it contains such a claim.

If you get a loan with such requirements, you should not take it.

Unsolicited Communications

Fraudsters sometimes contact people via phone calls, text messages, emails and WhatsApp with the promise of a quick withdrawal of zero rate loans. These emails and communications may lead you to believe that you will automatically be approved for a loan without meeting any requirements.

But it is wise to remember that companies will not normally contact you or send you unsolicited emails to obtain your private financial and personal information in order to provide you with a loan.

Ignore Credit Record

Any reputable lender will analyze a borrower's credit history before approving a loan to determine if they can reliably make their payments on time.

However, credit history is not what scammers and scammers worry about. Therefore, you should be extremely careful if a lender promises you a loan without reviewing your credit history and other factors such as employment, income, and education information.

Forced decisions under high pressure

You should know that a reliable lender will never force you to take out a loan immediately. Never give in to pressure to act quickly or reveal sensitive information such as your bank account passwords or debit or credit card details. High-pressure tactics, such as an impending loan offer or an impending deadline for signing loan forms, are certainly important warning signs of financial fraud.

How to avoid falling for this scam?

You can ensure your lending experience is hassle-free by doing your due diligence when choosing a lender and watching for glaring red flags. The more homework you do, covering all your bases, the less likely you are to choose a dodgy lender.

Any sensitive information such as your bank account number, social security number, card number, PIN and OTP should not be disclosed. Your bank or other trusted financial institution would never make such requests by phone, email or text message.

If you receive a call from someone claiming to be a representative of your bank, please verify their identity before proceeding. Find the bank's official phone number on the bank's website. They will be able to confirm that the call is genuine.

Always remember that nothing is free, and if an offer is too good to be true, it usually is a scam. Before you sign anything, be careful, resist the urge to fall into strong emotions like fear or greed, and review a simple fraud protection checklist.