How to Avoid Scams When You're Looking to Borrow Money

When you're looking to borrow money, the last thing you want is to uncover that what you thought was a decent loan is actually a scam.

Unfortunately, there are fraudulent companies that offer enticing, yet illegitimate, loans that end up leaving you worse off financially than where you started. Luckily, there are certain red flags you can look for to avoid getting caught in a scam.

The Red Flags of Loan Scams

Several warning signs will signify that a lender may not be legitimate. If you experience any of these in your interactions with a lender, run!

Red Flag #1: The Lender Has No Interest in Your Ability to Repay the Loan

Legitimate lenders want to make sure that you're capable of repaying the money you'll owe them. But scam companies who never actually intend to loan you money may make the process a bit too simple.

Be careful with lenders that don't require a credit check, proof of income or an alternative way of proving your ability to repay the loan, as well as those who don't ask to verify you have a bank account.

Red Flag #2: The Lender Has No Website or Physical Address

Any authorized lender should have a website that not only looks professional but is also secure. When viewing a lender's site, double-check for the lock to the left of the web address that signifies the website is operating securely.

The company also needs to provide a physical address to apply for a business license. If you don't see one on the website, ask before you agree to work with them, and be sure to check that they're registered in your state.

Red Flag #3: The Lender Asks You to Send Money First

This is a classic personal loan scheme. A lender will ask you to send a sum of money for "fees" associated with the loan. And once you send that amount, you'll never hear from them again. Lawful companies often allow you to take any origination fees from the loan amount itself before they send it to you. They'll also take the time to make sure you understand all associated fees before any money changes hands.

Red Flag #4: The Lender Wants You to Move Fast

Any lender who requires you to act now to lock in a particular rate should give you pause. Legitimate lenders will allow you the time to read over the fine print before committing. Any company that tries to move you through an online loan process too quickly might be doing so to try and get you to slip and fall right into their scam.

Tips to Avoid Scams

Here's what you can do to keep yourself safe:

  • Always check the lender's credibility: This includes checking the company website, calling the phone number listed online, and seeing if the company is established with the Better Business Bureau. Checking online reviews is another great way to confirm if a company is okay to work with. Previous borrowers are often the best to speak to the experience and will be brutally honest if it wasn't what they expected.
  • Keep personal information private: Don't provide your personal information like social security number or bank details before confirming the lender's legitimacy.
  • Go with your gut: If something feels wrong, it probably is. Even if the lender promises more money than you thought you'd get at a lower interest rate, make sure it checks the boxes and proves to be a legitimate business before you sign.

The Bottom Line

The sad truth about borrowing money is that dishonest lenders are looking to do you harm. Play it smart and keep personal information to yourself until you can verify the lender's credibility. By doing so, you have a good chance of avoiding scams and getting the financial assistance you need from a company you can trust.

Notice: Information provided in this article is for informational purposes only. Consult your financial advisor about your financial circumstances.

Source: iQuanti, Inc.

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Categories: Personal and Family Finances

Tags: Debt, Financial Services, Financial Solutions, Personal Finance