Scam artists and predatory lenders usually take advantage of vulnerable consumers during times of crisis. Consumers will also likely fall for their trickery during natural disasters, recessions, unemployment, or public health crises like COVID-19. Personal loan scams and frauds have seen a significant increase in recent years.
The most recent Federal Trade Commission (FTC) report states that $8.8 billion was reported lost to fraud in 2022, a 30% increase from the previous year. 15% of that total amount lost to fraud was found to be due to government impersonating scams, which accounted for over $3.8 billion.
What are personal loan scams and frauds?
Even though new scams pop up regularly, scammers rely on the same tactics, making them easier to spot once you know what to look for. Protecting yourself from personal loan scams is crucial to differentiating between legitimate and deceptive lenders that operate in the same market. You can trust Beem to find, compare options and choose the best personal loan to meet your needs.
Unfortunately, though, some scammers are eager to exploit helpless consumers who seek financial assistance. Remember the common warning signs to look out for to safeguard yourself from potential schemes. By staying vigilant and informed, protecting your finances becomes easier.
Often, scams seek to obtain personal information like your social security or credit card number. Other scams might gain access to personal accounts or make you pay loans you will never have access to. Regardless of the type of scam, there are always ways to distinguish genuine lenders from exploitative lenders.
10 Ways to Spot Personal Scams and Frauds
Awareness of certain warning signs before applying for a personal loan can help borrowers avoid becoming targets of fraudulent activities. Below are ten effective strategies to spot and identify personal loan scams:
- Up-front cash demands: Exploitive lenders may request upfront fees for immediate fund disbursement, even before completing the application process. However, legitimate lenders typically do not require an upfront payment.
- Guaranteed loan applications: Be vigilant about lenders that guarantee loans, as legitimate lenders will assess creditworthiness, whereas predatory lenders target high-risk borrowers and therefore show no concerns for your financial health.
- Hidden charges and costs: Fraudsters often fail to disclose associated costs and fees on their websites or during communications purposefully. Scrutinizing loan fees is, therefore, essential to detect potential loan scams.
- Lack of physical address: A lack of a physical address is a red flag. Avoid this immediately. It is crucial to verify whether your lender has a physical address. Vacant homes are often a cover, and therefore proper verification is a must at this step.
- Time-limited offers: Lenders that pressure you to accept or pay for a loan in a specific time frame often indicate a scam in play. Avoid them.
- Unsolicited communication: Spontaneous calls, emails, WhatsApp messages, or texts from your lender, often at odd times of the day, indicate suspicious activity.
- Unrealistic offers: If the offer is too good to be true, often, that’s because it is. Legitimate lenders do not randomly contact individuals with attractive loan offers without applications or credit checks.
- Unlicensed in your state: Lack of registration indicates a potential scam. Therefore, verifying if the lender is licensed in your state is essential. The Federal Deposit Insurance Corporation helps you with a simple online search. The FDIC name and location search tab allows you to search for all registered and insured banks from 1934. It is a good internet source to verify legitimate lenders quickly and effectively.
- Call the company: A quick call to verify the legitimacy of a company could save you not only time from back-and-forth conversations but also substantial amounts of money.
- Check the WHOIS database: The WHOIS database helps you look up company domains, emails, hosting, security, and other autonomous systems. It gives you a broader range of information about specific companies.
What to do if you are scammed
Falling victim to personal loan scams can be distressing, but knowing the proper steps can help mitigate the damage and protect yourself from more fraud.
If you suspect that you have fallen victim to personal loan fraud, there are immediate actions you must take. The first is maintaining meticulous records of all transactions, including payment receipts, as evidence for potential legal action. Secondly, file a police report providing comprehensive information on the fraud. Document everything!
You may consider reporting to the cybercrime division if you have been scammed online or via an app. Swift action is crucial to safeguard your funds and minimize the fraud’s impact. To ensure long-term protection, consider updating your passwords routinely and promptly blocking any accounts if you believe they are compromised. You can go the extra mile to safeguard your personal information and accounts with identity theft protection offered by Beem.
How to safeguard yourself from scams and frauds
One of the most effective ways consumers can protect themselves from fraud is to stay informed about scammers’ latest tactics. Regularly keeping up with relevant blog posts, news articles, and reputable sources makes it easy to recognize foul play.
Being skeptical about unsolicited forms of communication is a right of the consumer. Being rushed into making a decision is a clear-cut sign of avoidance. Suspicious, although enticing, make sure to avoid links, even if they describe your exact situation perfectly. Adopting a cautious approach decreases the risk of falling victim to scams.
BFF – The Better Financial Feed on Beem is another step you can take to plan and protect your money like an expert. Additionally, Beem’s personal loan feature can help you zero in on the kind of loan that suits your requirements best and helps you sail through a financial crunch.
Conclusion
Personal loan scams have increased in recent years, making it essential for borrowers to navigate and make informed decisions about lenders. Recognizing and familiarizing oneself with common warning signs is the simplest way to prevent falling victim to such fraudulent activities.
Consumers should be cautious of unsolicited communications and unrealistic offers. Alongside scrutinizing loan fees, physical addresses, and personal information of the lenders, license verification in specific states is also a suitable method to test an agency’s legitimacy. In an era where personal loans are rising at the same pace as exploitative techniques, a skeptical mindset and cautious approach have become integral in safeguarding your finances from personal loan fraud.
