28 Jun
2010

Lending scams can deprive you of cash and can ruin your credit rating. Whether you are applying for a personal loan, payday loan, or another type of loan product, watch out for these scams:

1) Pay first, get your loan later. This is by far the most common type of scam and it takes many forms. A lender may ask you for a deposit or a fee (sometimes called an application fee, processing charge or application fee). Or, a lender may tell you that your credit is so bad that you need to send some payments in advance. In all cases, these are scams. The lender will take your money and disappear. You will not get a loan and you will lose your money. Legitimate lenders do not ask you for money up front. The only exception is a car loan or a home loan, which involves a down payment.

2) Give up your collateral. Some lenders ask you for collateral. While this is typical for legitimate secured loans, scam lenders will ask for cash as collateral or will ask you to actually give them your collateral (by deeding it) before giving you a loan. No legitimate lender does this.

3) Unfair terms. Some lenders create scams by asking you for unfair terms. In fine print in your contract, for example, they give themselves permission to seize your collateral for no reason or charge huge administration or interest fees. Before signing any loan contract, have a professional review it.