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7 Warning Signs of a Personal Loan Scams

Know the seven warning signs of personal loan scams to avoid being a victim in this growing crime

Identity theft and personal loan scams are increasing as more of our lives go online. There’s big money in the billion-dollar personal loan business and even bigger money in stealing people’s banking information.

Apart from completely unplugging your world and living the hermit life in the back woods, the best way to avoid being a victim is to know some of the most common warning signs of personal loan scams.

Scammers are quick to change up their tactics but seven warning signs always seem to come out and give the fraud away.

Use these seven personal loan scam warning signs to protect yourself and your money.

Personal Loan Scam Warning Sign #1: No Credit Check Loans

Online lenders are in the business of making loans and collecting interest when those loans are repaid. The only way they can even guess at whether a loan will be repaid is by looking at a borrower’s credit history.

Don’t believe any lender that says they have ‘breakthrough’ technology that can estimate your credit or the interest rate on your loan through other information like your answers to a survey or from social media.

Legit online loan companies will always want to do two checks on your credit report, a ‘soft’ inquiry and a ‘hard’ inquiry. The ‘soft’ inquiry is just to verify some of your application information and doesn’t go on your credit report. The ‘hard’ inquiry is done after you agree to the interest rate and before your loan is funded.

The only online loans that don’t require a credit check or where you credit score won’t matter are payday loans like Check into Cash. These loans are only for a week or two and rates are so high that the lender makes money even if a few loans default.

I won’t say there’s no place for payday loans in your life, you might not have much of a choice if you have bad credit. Understand the few times when a payday loan is a better alternative and how to avoid the payday loan rate trap.

Personal Loan Scam Warning Sign #2: Upfront Fees or Loan Collateral

warning signs personal loan scams alertUpfront fees or loan collateral is the most common of personal loan scams. It used to be that scam lenders would ask you to wire an origination fee from your bank account for processing the loan.

People got wise to this scam so now scam lenders are asking for debit card information to act as collateral on a personal loan. They say that they aren’t touching the money on the debit card but just want to know that there is money there for security on the loan.

Then they drain the debit card and you never hear from them again.

You might pay a fee for a personal loan but it will always come out of your loan when it is funded. If a company is so sure that it can get you a personal loan, why is it asking for money upfront or to be wired from your bank account.

Better yet, go with a personal loan lender that doesn’t charge a loan origination fee like PersonalLoans. Avoiding the origination fee, as high as 5% on other personal loan sites, can save you hundreds on your loan.

Personal Loan Scam Warning Sign #3: Unregistered Lenders in Your State

All personal loan companies and lenders must be registered in the states where they do business. Registration is usually done through the State Attorney General’s Office and helps the state monitor what financial promises are being made to the public.

Don’t believe a lender if they say they don’t need to register because they are totally online or because they are not a U.S. company. If they aren’t registered, they are either lending illegally or an outright scam.

It’s always a good idea to check your state’s Attorney General’s website for complaints on a lender anyway. Don’t blow this off, it only takes a few minutes which isn’t a lot of time when you’re talking about borrowing thousands of dollars.

Personal Loan Scam Warning Sign #4: No Physical Address

This personal loan scam warning sign isn’t quite as concrete as the others but it’s a good check and could save you when in doubt. Most lenders are going to have a corporate office building or at least a physical address. Even online lenders will have offices somewhere.

Check the lender’s address on Google Maps if you’re unsure about the company. I say this warning sign isn’t as definite because I’ve seen legit businesses where the address image on Google Maps was nothing more than an empty field. The warning sign isn’t perfect but be leery of PO box addresses or non-existent offices.

Personal Loan Scam Warning Sign #5: Emails out of Nowhere

It always amazes me how spam email catches so many people every year. Any stranger offering you a commission, bonus or any money in an email is 99.9% of the time a scam. Ask yourself, why are they contacting me and not someone with experience in this kind of thing.

These email scams happen in personal loans as well. You receive an email with a loan offer and a rate that is too good to turn down…along with a link where you can supply your personal information. If the scammer didn’t have malicious software in the link that hacks your computer then the information you provide is more than enough to steal your identity.

Never click on a link or open an attachment in an email that is from someone you don’t know, just don’t do it. It’s not a sweepstakes number or a hilarious cat picture, it’s a hacking scam to get your information.

Personal Loan Scam Warning #6: Misspellings, Capitalization and Grammar

This scam warning would be funny if it didn’t still trap so many people into losing their money. If you can’t remember requesting information from a lender and don’t want to just delete the email, make sure you read it very carefully for mistakes in grammar and spelling.

When in doubt, you could even copy the email and put it through a grammar checking site like Grammarly.

Many of these loan scams are coming from outside the United States where English is not their native language. Scammers write up a quick email in English and hit send to 10,000 recipients, hoping that at least a few will fall for the scam.

This is an actual loan scam email example I received that has quite a few of the warnings signs.

loan scam email example

Loan Scam Email Example

Paypal scams are some of the most common because people can steal your money so quickly and it is more difficult to track compared to traditional bank accounts.

You’ll notice that there is no name after the “Dear ,” Often scammers will scrape a hacked website for information like names and email addresses. The emails they send automatically populate areas like the name from the info that was hacked. If there was no name on the account, there will be a blank space or weird greeting.

There will also often be misspellings and grammar mistakes in these scam emails. Any company worth billions of dollars has enough money to check its emails.

Finally, loan scam emails will almost always have a clickable button or link where you are asked to verify your information. What is really happening here is the hackers are either putting a virus on your computer to steal your info or will ask you to ‘confirm’ your identity on the website. Instead of confirming your identity, you will actually be giving them all the information they need to steal your money!

Personal Loan Scam Warning #6: Email Address

This is another easy scam warning to spot but one that most people don’t know about.

When you send an email from a website, the back half of that email address (the part after the @) will have the name of that company or website. Emails sent from Paypal will say @paypal.com while emails sent from gmail will say @gmail.com.

If an email says its coming from Paypal but the address ends in anything other than @paypal.com then it is clearly a scam.

Always double check where the email is coming from before you even consider reading it.

Common Loan Scams on the Internet

One of the most common loan scams is what’s called phishing. This is where thousands of emails are sent out to potential victims. The emails usually ask the recipients to confirm their bank account information when in fact they are giving the hackers all the info they need.

most common loan scams in america

Most Common Loan Scams in America

Another common loan scam is that the ‘lender’ will make a deposit into your bank account, supposedly to confirm the bank account for a future loan amount. They will then ask you to wire the money back to their account within 24 hours and they can release your loan.

What ends up happening is the scammer waits for you to wire the money to them, then they cancel the first deposit made to your account. It takes time for deposits to move from one account to another so just because your bank account shows money coming in, it doesn’t mean that money is actually in your account yet.

This is different from the real process of confirming a bank account used by most lenders. The lender will make two small deposits, almost always less than $0.50 each, and then ask you to confirm the amounts on their website.

They will then withdraw the two deposits automatically after the account is confirmed but a legitimate lender will never ask you to send the money back yourself.

How to Find Legitimate Loans on the Internet

We’ll cover what to do if you become the victim of a peer lending scam in the next section but there are some things you can do to find legitimate loans on the internet.

Reading through some of the loan scam warning signs should give you an idea of how to find legitimate loans online.

  • Always visit the lender’s website directly. Don’t click through an email to go to their site.
  • Avoid loans that promise no credit check or that require upfront fees
  • Make sure lenders are registered to do business in your state
  • Ignore any emails for loans. Legitimate lenders rarely market by email, if ever. Most spend their marketing on advertising online or on TV.

It helps to read a few reviews of online lenders and find two or three that you might be able to qualify for a loan. This will mean knowing your credit score and the approximate credit score you need to get a loan from each lender.

Some sites only lend to borrowers with very high credit scores while others will approve bad credit borrowers.

I’ve used a handful of peer to peer lending sites and online lenders over the last ten years.

I started with PersonalLoans.com after destroying my credit score in the 2008 housing bust. I used the loan site to consolidate my debt and later for a home improvement loan. The site specializes in bad credit loans but offers several options including p2p, personal loans and even traditional bank loans.

  • Credit score of 580 or above
  • Loans up to $40,000 with monthly payments up to 60 months
  • Rates from 9% to 36% depending on your credit score

Check your rate here on PersonalLoans.com

Upstart is a newer online lender and uses a unique credit scoring system that may make it easier for some borrowers to get a loan. Instead of just using your credit report and score to approve your loan, Upstart also takes into account your academic history including the school you went to and your degree.

That makes the site perfect for newly graduated borrowers with no or little credit. It can be a good option to consolidate student loans or just get the money you need to start your professional life.

  • Credit score isn’t as important as on other sites
  • Loans up to $50,000 with monthly payments up to 60 months
  • Rates from 9% to 30% depending on multiple factors

Check your rate here on Upstart

Online lenders will do a soft-pull of your credit when you apply so it doesn’t affect your credit score. Only when you accept the loan does the site do a hard-pull of your report and the loan goes on as a debt.

This is why I recommend applying on at least two or three sites to see which one offers the best rate. It takes less than five minutes to apply and just a 1% difference can save you thousands on your loan.

What to do if you become the victim of a personal loan or peer lending scam

If you are the victim of one of these personal loan scams, call your local police immediately to file a report. They likely won’t be able to do much if it’s an online lender but it will get the report filed and public and might help others in your area avoid the same scam.

Next, file a complaint with the Federal Trade Commission (FTC) Internet Crime Complaint Center.  Again, this isn’t so much to resolve the crime but to report it publicly and shut down the loan scammers.

personal loan scams contact complaints

You also need to contact each of the three credit rating agencies; Experian, Equifax and TransUnion. You need to notify them by phone and in writing that your personal information may have been stolen. This will help your case if any charges are made on your credit accounts or if your identity is used for new loans.

Finally, check your credit reports every few months after the incident or at least every year to make sure nothing is being added without your permission. Identity theft happens every two seconds in America and can cost you tens of thousands besides what it can do to your credit score and the rate you pay on loans.

Unfortunately, it seems personal loan scams and identity theft are on the rise and something we’re just going to have to try to avoid. The scammers are looking for easy targets so know the warning signs to a personal loan scam. Check out the legit personal loan sites in our list of lending sites including features and fees of each.

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Comments

  1. Margaret Bandy says:

    I have a question I had a loan company call me offering to loan me 5000.They claim in order to get the money they have to put money in my account.Then i have to go draw the money out of my account and return to them before bank opens with debit card.

  2. Ahmad Johari says:

    Hi
    Any thoughts about international loan scams? What to look for?
    I am new to this and looking for personal loan internationally as local banks arent helpful
    in my country.

    • Hi Ahmad. Not sure I can help you with this one. I’m not familiar with personal loan sites outside the United States. I recommend my local (U.S.) audience to steer clear of foreign peer lending companies (most aren’t registered to do business in a state anyway).

  3. someone from a loan place said that in the am they will deposit a fraction of the loan to be sure that I have the right intentions. Then to call them back and send it back to them. After that is done they went on to say after an hour a loan amount for 2000 will be deposit into account. This person also sent via email their certificate showing ” legitimate proof ” is this something to be cautious of. They set out the repayment information and it is being done unsecured due to credit issues and being easier. Any advice would be appreciated

  4. Rebecca morgan says:

    I had a loan call me saying they work with the federal government. They knew all my info but needed me to give them my bank acct user name and password so they can look into my bank and see if I had money. I’ve had a loan before and know they looked into my bank but I did everything. They never once asked for my user name and password

  5. Hi Joseph, I have a guy willing to meet me in his home town at home or in a Wells Fargo building to get the loan done.
    The loan is 100% funded then has a back end fee of 5%. He has talked to me on the phone and seems legit but does have broken English when writing and talking. The phone number has an area code of where he says he is from. He is too busy to go 20 miles to the next metropolis to meet me at my attorney’s office but he will meet at an attorneys office in his home town.

    The terms are great! (Kind of a yellow flag) and the only personal info he has asked for on the application other than my residence address, email, and phone number is my license number.

    Can they really do anything with that? This one is tricky. What do you think? If the license number isn’t an issue, I was thinking of getting a bank account with a lock on it and using that to receive the funds.

    I would love to hear what you think about this one. Or anyone else.

    • It definitely sounds suspicious. There are a lot of things here that are not usually done with a traditional loan, a big red flag. With the information he’s requesting it sounds like he’s just trying to get enough information to go online and get enough that he can use to steal your identity or some other scam. How did you find this guy? Did he call you or did you call him initially? I would stick with the loan sites we know are legit or go in to a local bank for a traditional loan.

  6. I am not able to get a traditional loan. They all want 20% down on an investment property unfortunately.

    So someone can steal an identity with just a license number? I didn’t know it was that easy considering people always lose their license and never get a new number.

  7. sorry. I posted a local add on craigslist looking for a private investor. I have called him, and he has called me.

  8. Carol L Duda says:

    Just Happened to me. The deposit via mobile banking. They then “want their money back”. You withdraw and send it back. Then the mobile deposit is revoked from origination due to NSF. Leading you to lose double.

    • This is one of the most common loan scams Carol and happens to a lot of people. Amazing that the banking regulators haven’t done anything about it like a law that freezes deposits so they can’t be revoked under certain circumstances.

  9. Amy Forgette says:

    I have had two different loan companies email me telling me that I’m late on my payment and an outstanding balance with them. I have never taken out a loan with either one of them and I’ve emailed them back telling them that someone must have stolen my personal information and has taken them out in my name. I continue to receive them but I have no loans with any company. I don’t know what to do. Could someone help me please.

    • Just ignore these Amy. A lot of loan scams and identity theft are what’s called ‘phishing’ where they try to get your information from some bogus warning email. They’ll ask you to confirm all kinds of information and with that they can steal your identity. If you didn’t apply for loans with them then ignore it.

  10. Shantequa Roberts says:

    I had a loan company call me from Dallas taxes they told me they from advanced America he was a foreign guy and he gave me the address of it I gave him a prepaid card account but he said he can’t use it so I said I don’t have an account he told me that he can western union my loan I would have to pay a small fee of it between 50-70 dollars he told me it would be 70 so go to a rite aide and get a 25 dollar google play and a 50 dollars google play card I didn’t do it cause he said they close at 7 the loan was 2000 …is it true they can western union loans

    • Definitely a loan scam Shantequa. There are a lot of warning signs here. First, they called you instead of you calling them.

      Also, why would a loan company only be using Google Play cards. Legitimate lenders will put the money directly in your bank account, not by Western Union.

      • Michael Wright says:

        Joseph, Don’t mean to sound redundant on this issue as the previous post was similar to what I encountered. Caller stated I was pre-approved for $8k but I stated I would only need the minimum of $3000.

        They told me they would deposit $800 in my account and I was to purchase 2 Google Play cards for certain amounts and then take photos of the bar code on back and the receipt for the purchase. Then she said funds would be in my account an 2 hours.

        Upon calling the number of the person I had been speaking with during the process, the phone lines were busy.

        • No such thing as redundant when we’re uncovering loan scams Michael. Lots of warning signs here. Why would a loan company want a Google Play card as payment? Legit loan companies will never ask you to buy anything or refund them any money.

  11. A. Brown says:

    Question… I applied for a Personal loan (I have poor to Fair Credit rating I’m right on the edge so it depends on who I talk to…) lender called offered me 2 options one is I get a Cosigner with a 720 score or higher (which I dont have) or I have to pay 3 months payment to Secure the loan which will come out of the Total Cost of the loan but I have to pay upfront before the loan is funded… It covers my first 3 months of loan payment wondering if this is a legit lending Practice. Loan terms all seem Legit 3 years at 10% on $5,000 monthly payment would be 161.00 they sent me the contract to look over I have everything looks like other contracts I’ve read pretty standard they gave me 30days to decide the reason for my question is due to them being a private lender I did not find info on Attorney general ‘s website I looked on the California Website as that is where their Physical address is located looked up the address on Google maps it is an actual office building…. Not sure if I should be sending first 3 months of payments….. I cant the reviews I have seen seem good but there are not Many and it seems like they could of possibly either had them swiped or had someone swipe them from their site I got to this site through a reputable credit website… just do not want to get scammed as I need the money but dont have the credit for Traditional lenders…

    • Don’t do it! You should never have to pre-pay a loan or send any money before your loan is funded. These loan scams can be extremely persuasive and seem legit but it almost always means having to pay them something before you get your loan…and then they disappear.

  12. Christina says:

    Ok so im trying to get a personal loan and Speedy Loans called me back after filling out an app.
    After all is said and done they said they will send me 3000 of the loan tonight and I send back 1000 tomorrow they said this was because my credit score is so low and i’ve never had a loan with them so to bypass the credit score “it shows i’ve had a smaller loan before”.

  13. Hi Joseph,

    I have a question. I had a guy on Craigslist say he can credit card fund my account (bank account or PayPal account or both) and the amounts vary so if he were to put 5000.00 in my account I would keep 15% if it went into my bank account and 10% into my PayPal account the balance I would then Western Union transfer to a guy in Nigeria he is the person responsible for the software that helps him do the credit card funding. Is this wire fraud? or laundering money?

    I know credit card funding accounts is legit (looked it up) but the second part of his story is very odd.

    • Definitely a loan scam. I’ve seen this one before and it has to do with the timing and how long the money takes to process for different loans. The second you send him the money back, he cancels his initial deposit into your account.

  14. Christy Beck says:

    have u ever heard of leap credit? they put money in my account but when payment was due only took a third out and claim they rook it all. they never sent me loan documents just text messages. i looked them up and the site looks legit so i don’t know what to do. Ive never heard of borrowing 500 and paying back almost 1700. PLEASE HELP ME!!!!

    • It’s hard to say without seeing what you agreed to but I would definitely say this isn’t a legit type of loan. Any kind of enforceable loan requires signed documents and a truth-in-lending disclosure. Call your bank immediately to tell them to stop accepting debits directly out of your account from the company. Until you get actual documents spelling out your loan, you don’t have one.

  15. David k Yetman says:

    So im in the middle of this one where you receive money from them in your checking account and then immediately send them money and then 2 hours later get your loan so how can I take the money out of the bank or off my credit card and keep it for 3 days if their deposit clears and 3 days with the bank then I can send them money how do you get around that

    • You should never have to send money back to a legit personal loan company. Contact your bank and tell them to deny all requests from the fake lender so they can’t take their money back. Contact your credit card as well.

  16. I have someone contacting me claiming that they are from ACE cash express and i got approved for $5000 loan and they sent the agreement by email a few things dont seem right 1 I received a text also I replied to the text asking what to do next do I go to my local ACE and I was told no since I applied for the loan online it’s an online transaction only 2 they asked for my bank account information routing number,account, and my online sign in information user name and password I told them I don’t use online banking after that I didn’t receive anymore text so I text telling them my husband told me to contact the police well they text back saying my complaint would not hold something like that because I didn’t give them information so I said so you are a fake I haven’t heard anything since I’m 99.9% sure it was a scam

  17. Jan Lee says:

    I have 2 different private lenders I am speaking with. The first one gave me a 5% interest rate for 36 months on $6000 monthly payment $179.xx. I would need to pay $250 to his attorney for drawing up the contract. No credit check

    Second private lender gave me 40 months to pay $5000 and wants $70 to cover wire fees. Required 2 contacts and an ID. No credit check. Good phone communication with this lender. Can pick my monthly repayment date and if a day or two late just need to call and let him know. He doesn’t seem to care one way or the other if we make a transaction or not. His money is coming from real estate.

  18. Ridgedale Financial Legit? Have a loan pending. My credit isnt great so they required a co-signer but I don’t have one. So they said they could do it with a $500 security deposit. This right?

  19. Susan Boudro says:

    I am desperate need of money I was just scammed by a company called the loan club and changed all my bank information. I went online to find information on how to know if you are being scammed and found the 7 warning signs of being scammed . They gave a website on a company called Personal Loan .com Can you tell me if this company is legit?

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